0000828944 us-gaap:OperatingSegmentsMember wsfs:WsfsBankMember 2018-01-01 2018-06-30
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
FORM 10-Q
(Mark One)
x☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172019
OR
¨

☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-35638

WSFS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 
     
Delaware22-2866913
(State or other jurisdiction of Incorporation or organization)(I.R.S. Employer Identification Number)
     
500 Delaware Avenue,Wilmington,Delaware 19801
(Address of principal executive offices)(Zip Code)
     
 (302)792-6000 
 (Registrant’s telephone number, including area code) 
     
 Not Applicable 
 (Former name or former address, if changed since last report) 

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareWSFSNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesx    No  ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files),    .    Yesx    No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x  Accelerated filer¨☐
    
Non-accelerated filer 
¨ (Do not check if smaller reporting company)
☐		  Smaller reporting company¨☐
      
Emerging growth company ¨☐   
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  x
The Registrant had 31,389,882
Number of shares outstanding of the issuer's common stock, par value $0.01 per share, outstanding at November 3, 2017.
as of the latest practicable date: 52,988,084 shares as of August 2, 2019.
 



WSFS FINANCIAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 PART I. Financial InformationPage
Item 1.Financial Statements (Unaudited) 
 
Consolidated Statements of Income for the Three and NineSix Months Ended SeptemberJune 30, 20172019 and 20162018
5
 
Consolidated Statements of Comprehensive Income for the Three and NineSix Months Ended SeptemberJune 30, 20172019 and 20162018
6
 
Consolidated Statements of Financial Condition as of SeptemberJune 30, 20172019 and December 31, 20162018
7
 
Consolidated Statements of Changes in Stockholders' Equity for the NineThree and Six Months Ended SeptemberJune 30, 20172019 and 2016
7
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 20162018
8
 
Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2019 and 2018
10
Notes to the Consolidated Financial Statements for the Three and NineSix Months Ended SeptemberJune 30, 2017 and 20162019
1012
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
4656
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
5971
Item 4.
Controls and Procedures
5971
PART II. Other Information
Item 1.
Legal Proceedings
6072
Item 1A.
Risk Factors
6072
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
6072
Item 3.
Defaults upon Senior Securities
6173
Item 4.
Mine Safety Disclosures
6173
Item 5.
Other Information
6173
Item 6.
Exhibits
6173

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, and exhibits thereto, contains estimates, predictions, opinions, projections and other “forward-looking statements” as that phrase is defined in the Private Securities Litigation Reform Act of 1995. Such statements include, without limitation, references to the Company’s predictions or expectations of future business or financial performance as well as its goals and objectives for future operations, financial and business trends, business prospects and management’s outlook or expectations for earnings, revenues, expenses, capital levels, liquidity levels, asset quality or other future financial or business performance, strategies or expectations. The words “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project” and similar expressions, among others, generally identify forward-looking statements. Such forward-looking statements are based on various assumptions (some of which may be beyond the Company’s control) and are subject to risks and uncertainties (which change over time) and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:
those related to difficult market conditions and unfavorable economic trends in the United States generally, and particularly in the markets in which the Company operates and in which its loans are concentrated, including the effects of declines in housing markets, an increase in unemployment levels and slowdowns in economic growth;
the Company’s level of nonperforming assets and the costs associated with resolving problem loans including litigation and other costs;
possible additional loan losses and impairment in the collectability of loans;
changes in market interest rates, which may increase funding costs and reduce earning asset yields and thus reduce margin;
the impact of changes in interest rates and the credit quality and strength of underlying collateral and the effect of such changes on the market value of the Company’s investment securities portfolio;
the credit risk associated with the substantial amount of commercial real estate, construction and land development and commercial and industrial loans in our loan portfolio;
the extensive federal and state regulation, supervision and examination governing almost every aspect of the Company’s operations including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act), the Economic Growth, Regulatory Relief and Consumer Protection Act (which amended the Dodd-Frank Act) (the Economic Growth Act) and the rules and regulations issued in accordance with this statutetherewith and potential expenses associated with complying with such regulations;
the Company’s ability to comply with applicable capital and liquidity requirements (including the finalized Basel III capital standards), including our ability to generate liquidity internally or raise capital on favorable terms;
possible changes in trade, monetary and fiscal policies, laws and regulations and other activities of governments, agencies, and similar organizations;
conditions in the financial markets that may limit the Company’s access to additional funding to meet its liquidity needs;
any impairment of the Company’s goodwill or other intangible assets;
•
failure of the financial and operational controls of the Company’s Cash Connect® division;
the success of the Company’sCompany's growth plans, including the successful integration of past and future acquisitions;
the Company’s ability to fully realize the cost savings and other benefits of its acquisitions, manage risks related to business disruption following those acquisitions, and post-acquisition customer acceptance of the Company’s products and services and related customer disintermediation;
negative perceptions or publicity with respect to the Company’s trust and wealth management business;
adverse judgments or other resolution of pending and future legal proceedings, and cost incurred in defending such proceedings;
system failurefailures or cybersecurity incidents or other breaches of the Company’s network;network security;
the Company’s ability to recruit and retain key employees;
the effects of problems encountered by other financial institutions that adversely affect the Company or the banking industry generally;
the effects of weather and natural disasters such as floods, droughts, wind, tornadoes and hurricanes as well as effects from geopolitical instability and man-made disasters including terrorist attacks;
possible changes in the speed of loan prepayments by the Company’s customers and loan origination or sales volumes;

possible changes in the speed of prepayments of mortgage-backed securities due to changes in the interest rate environment, and the related acceleration of premium amortization on prepayments in the event that prepayments accelerate;
regulatory limits on the Company’s ability to receive dividends from its subsidiaries and pay dividends to its stockholders;

the effects of any reputational,reputation, credit, interest rate, market, operational, legal, liquidity, regulatory and compliance risk resulting from developments related to any of the risks discussed above; and
the costs associated with resolving any problem loans, litigation and the effects of other risks and uncertainties, including those discussed in the Company’s Form 10-K for the year ended December 31, 20162018 and other documents filed by the Company with the Securities and Exchange Commission from time to time. 
We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date they are made. The Company disclaims any duty to revise or update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company for any reason, except as specifically required by law.


As used in this Quarterly Report on Form 10-Q, the terms "WSFS"“WSFS”, "the Company"“the Company”, "registrant"“registrant”, "we"“we”, "us"“us”, and "our"“our” mean WSFS Financial Corporation and its subsidiaries, on a consolidated basis, unless the context indicates otherwise.


Cash Connect is our registered trademark. Any other trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.



WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
(Dollars in thousands, except per share data) (Unaudited)
Interest income:        
Interest and fees on loans $58,504
 $49,849
 $169,258
 $140,394
Interest on mortgage-backed securities 4,955
 3,854
 14,132
 11,658
Interest and dividends on investment securities:        
Taxable 14
 80
 137
 242
Tax-exempt 1,125
 1,134
 3,387
 3,418
Other interest income 412
 420
 1,256
 1,174
  65,010
 55,337
 188,170
 156,886
Interest expense:        
Interest on deposits 3,862
 2,412
 10,278
 6,734
Interest on senior debt 1,807
 2,119
 6,049
 4,236
Interest on Federal Home Loan Bank advances 2,402
 1,225
 6,057
 3,397
Interest on federal funds purchased and securities sold under agreements to repurchase 273
 113
 709
 457
Interest on trust preferred borrowings 500
 415
 1,418
 1,183
Interest on other borrowings 37
 32
 113
 88
  8,881
 6,316
 24,624
 16,095
Net interest income 56,129
 49,021
 163,546
 140,791
Provision for loan losses 2,896
 5,828
 6,901
 7,862
Net interest income after provision for loan losses 53,233
 43,193
 156,645
 132,929
Noninterest income:        
Credit/debit card and ATM income 9,350
 7,776
 26,406
 21,930
Investment management and fiduciary income 8,809
 6,074
 25,683
 17,610
Deposit service charges 4,695
 4,482
 13,652
 13,100
Mortgage banking activities, net 1,756
 2,555
 4,785
 6,025
Securities gains, net 736
 1,040
 1,764
 1,890
Loan fee income 483
 542
 1,483
 1,499
Bank owned life insurance income 546
 255
 1,124
 697
Other income 6,066
 4,862
 17,312
 14,011
  32,441
 27,586
 92,209
 76,762
Noninterest expense:        
Salaries, benefits and other compensation 29,172
 24,804
 86,231
 71,189
Occupancy expense 4,756
 4,335
 14,602
 12,560
Equipment expense 2,922
 2,653
 9,544
 7,642
Professional fees 2,248
 1,554
 6,552
 6,891
Data processing and operations expenses 1,817
 1,500
 5,185
 4,564
Marketing expense 712
 712
 2,268
 2,177
Loan workout and OREO expenses 484
 511
 1,504
 1,059
FDIC expenses 560
 469
 1,683
 2,080
Early extinguishment of debt

 695
 —
 695
 —
Corporate development expense 153
 5,885
 857
 7,003
Other operating expense 10,644
 8,811
 29,275
 24,552
  54,163
 51,234
 158,396
 139,717
Income before taxes 31,511
 19,545
 90,458
 69,974
Income tax provision 10,942
 6,823
 30,382
 24,004
Net income $20,569
 $12,722
 $60,076
 $45,970
Earnings per share:        
Basic $0.65
 $0.42
 $1.91
 $1.54
Diluted $0.64
 $0.41
 $1.86
 $1.50
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.


WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
(Dollars in thousands) (Unaudited) (Unaudited)
Net Income $20,569
 $12,722
 $60,076
 $45,970
Other comprehensive income:        
Net change in unrealized gains on investment securities available for sale        
Net unrealized gains (loss) arising during the period, net of tax expense (benefit) of $761, ($682), $3,498 and $8,668, respectively 1,289
 (1,112) 5,802
 14,143
Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $261, $395, $628 and $718, respectively (475) (645) (1,136) (1,172)
  814
 (1,757) 4,666
 12,971
Net change in securities held to maturity        
Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $60, $60, $181 and $187, respectively (99) (102) (297) (305)
Net change in unfunded pension liability        
Change in unfunded pension liability related to unrealized (loss) gain, prior service cost and transition obligation, net of tax (benefit) expense of ($15), ($14), ($42) and $266, respectively (22) (20) (67) 436
Net change in cash flow hedge        
Net unrealized gain arising during the period, net of tax expense of $26, $38, $118 and $38, respectively 42
 61
 192
 61
Total other comprehensive income (loss) 735
 (1,818) 4,494
 13,163
Total comprehensive income $21,304
 $10,904
 $64,570
 $59,133
  Three Months Ended June 30, Six Months Ended June 30,
  2019 2018 2019 2018
(Dollars in thousands, except per share data) (Unaudited)
Interest income:        
Interest and fees on loans and leases $129,001
 $64,442
 $216,118
 $124,907
Interest on mortgage-backed securities 12,229
 6,190
 22,695
 11,589
Interest and dividends on investment securities:        
Taxable 31
 16
 50
 33
Tax-exempt 999
 1,092
 2,024
 2,195
Other interest income 643
 411
 1,593
 1,040
  142,903
 72,151
 242,480
 139,764
Interest expense:        
Interest on deposits 16,123
 6,368
 27,065
 11,608
Interest on Federal Home Loan Bank advances 806
 2,536
 3,396
 4,999
Interest on senior debt 1,180
 1,180
 2,359
 2,359
Interest on federal funds purchased 805
 434
 1,592
 880
Interest on trust preferred borrowings 717
 637
 1,443
 1,194
Interest on other borrowings 40
 7
 79
 21
  19,671
 11,162
 35,934
 21,061
Net interest income 123,232
 60,989
 206,546
 118,703
Provision for loan losses 12,195
 2,498
 19,849
 6,148
Net interest income after provision for loan losses 111,037
 58,491
 186,697
 112,555
Noninterest income:        
Credit/debit card and ATM income 13,677
 10,709
 25,192
 20,514
Investment management and fiduciary income 10,382
 10,244
 20,529
 19,433
Deposit service charges 6,103
 4,664
 10,849
 9,294
Mortgage banking activities, net 2,846
 1,692
 4,938
 3,429
Loan fee income 650
 567
 1,535
 1,166
Securities gains, net 63
 —
 78
 21
Unrealized gains on equity investments 1,033
 —
 4,831
 15,346
Bank owned life insurance income 383
 —
 600
 232
Other income 7,734
 7,111
 15,441
 13,019
  42,871
 34,987
 83,993
 82,454
Noninterest expense:        
Salaries, benefits and other compensation 48,550
 30,944
 84,755
 60,797
Occupancy expense 8,810
 5,008
 15,177
 10,256
Equipment expense 5,444
 3,176
 9,433
 6,265
Data processing and operations expenses 3,731
 1,896
 6,319
 3,803
Professional fees 2,915
 2,320
 4,787
 4,045
Marketing expense 1,947
 1,084
 3,537
 1,842
FDIC expenses 1,042
 515
 1,662
 1,114
Loan workout and OREO expenses 1,145
 681
 1,253
 1,107
Corporate development expense 13,946
 457
 40,573
 457
Restructuring expense 1,881
 —
 6,243
 —
Recovery of fraud loss —
 —
 —
 (1,665)
Other operating expense 18,437
 11,750
 31,701
 23,222
  107,848
 57,831
 205,440
 111,243
Income before taxes 46,060
 35,647
 65,250
 83,766
Income tax provision 10,091
 6,907
 16,351
 17,676
Net income $35,969
 $28,740
 $48,899
 $66,090
Less: Net loss attributable to noncontrolling interest (231) —
 (324) —
Net income attributable to WSFS $36,200
 $28,740
 $49,223
 $66,090
Earnings per share:        
Basic $0.68
 $0.91
 $1.07
 $2.10
Diluted $0.68
 $0.89
 $1.06
 $2.05
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITIONCOMPREHENSIVE INCOME
  September 30, 2017 December 31, 2016
(Dollars in thousands, except per share and share data) (Unaudited)
Assets:    
Cash and due from banks $117,343
 $119,929
Cash in non-owned ATMs 612,443
 698,454
Interest-bearing deposits in other banks including collateral of $3,380 at September 30, 2017 and December 31, 2016 3,579
 3,540
Total cash and cash equivalents 733,365
 821,923
Investment securities, available for sale (amortized cost of $816,114 at September 30, 2017 and $807,761 at December 31, 2016) 810,433
 794,543
Investment securities, held to maturity-at cost (fair value of $163,397 at September 30, 2017 and $163,232 at December 31, 2016) 161,721
 164,346
Loans, held for sale at fair value 19,313
 54,782
Loans, net of allowance for loan losses of $40,201 at September 30, 2017 and $39,751 at December 31, 2016 4,670,216
 4,444,375
Bank owned life insurance 102,727
 101,425
Stock in Federal Home Loan Bank of Pittsburgh-at cost 33,277
 38,248
Other real estate owned 3,924
 3,591
Accrued interest receivable 17,789
 17,027
Premises and equipment 48,345
 48,871
Goodwill 166,007
 167,539
Intangible assets 23,109
 23,708
Other assets 85,118
 84,892
Total assets $6,875,344
 $6,765,270
Liabilities and Stockholders’ Equity    
Liabilities:    
Deposits:    
Noninterest-bearing demand $1,357,597
 $1,266,306
Interest-bearing demand 1,057,571
 935,333
Money market 1,347,576
 1,257,520
Savings 557,914
 547,293
Time 305,347
 332,624
Jumbo certificates of deposit – customer 251,782
 260,560
Total customer deposits 4,877,787
 4,599,636
Brokered deposits 173,932
 138,802
Total deposits 5,051,719
 4,738,438
Federal funds purchased and securities sold under agreements to repurchase 70,000
 130,000
Federal Home Loan Bank advances 697,812
 854,236
Trust preferred borrowings 67,011
 67,011
Senior debt 98,116
 152,050
Other borrowed funds 70,369
 64,150
Accrued interest payable 3,882
 1,151
Other liabilities 75,574
 70,898
Total liabilities 6,134,483
 6,077,934
Stockholders’ Equity:    
Common stock $0.01 par value, 65,000,000 shares authorized; issued 56,217,643 at September 30, 2017 and 55,995,219 at December 31, 2016 562
 580
Capital in excess of par value 334,221
 329,457
Accumulated other comprehensive loss (3,123) (7,617)
Retained earnings 680,554
 627,078
Treasury stock at cost, 24,807,145 shares at September 30, 2017 and 24,605,145 shares at December 31, 2016 (271,353) (262,162)
Total stockholders’ equity 740,861
 687,336
Total liabilities and stockholders’ equity $6,875,344
 $6,765,270
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.
WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Stockholders' Equity
Balance, December 31, 2015 55,945,245
 $560
 $256,435
 $696
 $570,630
 $(247,850) $580,471
Net Income —
 —
 —
 —
 45,970
 —
 45,970
Other comprehensive income —
 —
 —
 13,163
 —
 —
 13,163
Cash dividend, $0.18 per share —
 —
 —
 —
 (5,437) —
 (5,437)
Issuance of common stock including proceeds from exercise of common stock options 174,211
 2
 1,888
 —
 —
 —
 1,890
Stock-based compensation expense —
 —
 2,066
 —
 —
 —
 2,066
Acquisition of Penn Liberty 1,806,748
 18
 66,759
 —
 —
 —
 66,777
Repurchase of common stock, 409,371 shares —
 —
 —
 —
 —
 (12,890) (12,890)
Treasury share adjustment (1)
 (2,022,627) 

 —
 —
 —
 —
 —
Balance, September 30, 2016 55,903,577
 $580
 $327,148
 $13,859
 $611,163
 $(260,740) $692,010
               
Balance, December 31, 2016 55,995,219
 $580
 $329,457
 $(7,617) $627,078
 $(262,162) $687,336
Net Income —
 —
 —
 —
 60,076
 —
 60,076
Other comprehensive income —
 —
 —
 4,494
 —
 —
 4,494
Cash dividend, $0.21 per share —
 —
 —
 —
 (6,600) —
 (6,600)
Issuance of common stock including proceeds from exercise of common stock options 222,424
 2
 2,315
 —
 —
 —
 2,317
Stock-based compensation expense —
 —
 2,449
 —
 —
 —
 2,449
Repurchase of common stock, 204,000 shares —
 (20) —
 —
 —
 (9,191) (9,211)
Balance, September 30, 2017 56,217,643
 $562
 $334,221
 $(3,123) $680,554
 $(271,353) $740,861

(1)
The 2016 Consolidated Statement of Changes in Stockholder's Equity has been revised to reflect an adjustment between shares issued and treasury stock. This reclassification had no impact on shares outstanding, earnings per share or retained earnings.


  Three Months Ended June 30, Six Months Ended June 30,
  2019 2018 2019 2018
(Dollars in thousands) (Unaudited) (Unaudited)
Net income $35,969
 $28,740
 $48,899
 $66,090
Less: Net loss attributable to noncontrolling interest (231) —
 (324) —
Net income attributable to WSFS 36,200
 28,740
 49,223
 66,090
Other comprehensive income (loss):        
Net change in unrealized gains (loss) on investment securities available for sale        
Net unrealized gains (loss) arising during the period, net of tax (benefit) expense of $6,289 and ($1,398), $11,831, and ($5,112), respectively 19,591
 (4,501) 36,856
 (16,328)
Less: reclassification adjustment for net gains on sales realized in net income, net of tax expense of $15, $0, $19 and $5, respectively
 (48) —
 (59) (16)
  19,543
 (4,501) 36,797
 (16,344)
Net change in securities held to maturity        
Amortization of unrealized gain on securities reclassified to held-to-maturity, net of tax expense of $27, $36, $56, and $73, respectively (84) (117) (177) (236)
Net change in unfunded pension liability        
Change in unfunded pension liability related to unrealized (loss) gain, prior service cost and transition obligation, net of tax (benefit) expense of ($8), ($9), ($17) and $9, respectively (34) (30) (175) 29
Net change in cash flow hedge        
Net unrealized gain (loss) arising during the period, net of tax expense (benefit) of $323, ($76), $525 and ($316) respectively 1,007
 (245) 1,637
 (1,010)
Total other comprehensive income (loss) 20,432
 (4,893) 38,082
 (17,561)
Total comprehensive income $56,632
 $23,847
 $87,305
 $48,529
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.


WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  June 30, 2019 December 31, 2018
(Dollars in thousands, except per share and share data) (Unaudited)  
Assets:    
Cash and due from banks $183,632
 $134,939
Cash in non-owned ATMs 338,006
 484,648
Interest-bearing deposits in other banks including collateral of $0 at June 30, 2019 and $1,000 at December 31, 2018 187
 1,170
Total cash and cash equivalents 521,825
 620,757
Investment securities, available for sale (amortized cost of $1,767,602 at June 30, 2019 and $1,224,227 at December 31, 2018) 1,796,870
 1,205,079
Investment securities, held to maturity, at cost (fair value $145,867 at June 30, 2019 and $149,431 at December 31, 2018) 143,317
 149,950
Other investments 48,711
 37,233
Loans, held for sale at fair value 51,721
 25,318
Loans and leases, net of allowance of $45,364 at June 30, 2019 and $39,539 at December 31, 2018 8,567,709
 4,863,919
Bank owned life insurance 30,118
 6,687
Stock in Federal Home Loan Bank of Pittsburgh at cost 15,874
 19,259
Other real estate owned 3,703
 2,668
Accrued interest receivable 40,784
 22,001
Premises and equipment 103,787
 44,956
Goodwill 473,712
 166,007
Intangible assets 101,984
 20,016
Other assets 256,480
 65,020
Total assets $12,156,595
 $7,248,870
Liabilities and Stockholders’ Equity    
Liabilities:    
Deposits:    
Noninterest-bearing $2,205,992
 $1,626,252
Interest-bearing 7,388,718
 4,014,179
Total deposits 9,594,710
 5,640,431
Federal funds purchased 115,000
 157,975
Federal Home Loan Bank advances 115,675
 328,465
Trust preferred borrowings 67,011
 67,011
Senior debt 98,497
 98,388
Other borrowed funds 18,948
 47,949
Accrued interest payable 7,064
 1,900
Other liabilities 303,302
 85,831
Total liabilities 10,320,207
 6,427,950
Stockholders’ Equity:    
Common stock $0.01 par value, 90,000,000 shares authorized; issued 57,239,683 at June 30, 2019 and 56,926,978 at December 31, 2018 573
 569
Capital in excess of par value 1,043,065
 349,810
Accumulated other comprehensive income (loss) 22,688
 (15,394)
Retained earnings 830,397
 791,031
Treasury stock at cost, 4,007,722 shares at June 30, 2019 and 25,552,887 shares at December 31, 2018 (60,112) (305,096)
Total stockholders’ equity of WSFS 1,836,611
 820,920
Noncontrolling interest (223) —
Total stockholders' equity 1,836,388
 820,920
Total liabilities and stockholders' equity $12,156,595
 $7,248,870
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
  Six Months Ended June 30, 2019
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, December 31, 2018 56,926,978
 $569
 $349,810
 $(15,394) $791,031
 $(305,096) $820,920
 $—
 $820,920
Net income (loss) —
 —
 —
 —
 49,223
 —
 49,223
 (324) 48,899
Other comprehensive income —
 —
 —
 38,082
 —
 —
 38,082
 —
 38,082
Cash dividend, $0.23 per share —
 —
 —
 —
 (9,857) —
 (9,857) —
 (9,857)
Issuance of common stock including proceeds from exercise of common stock options 312,705
 4
 4,123
 —
 —
 —
 4,127
 —
 4,127
Re-issuance of treasury stock in connection with BNCL merger and related items —
 —
 687,897
 —
 —
 262,071
 949,968
 101
 950,069
Stock-based compensation expense —
 —
 1,235
 —
 —
 —
 1,235
 —
 1,235
Repurchases of common shares (1)
 —
 —
 —
 —
 —
 (17,087) (17,087) —
 (17,087)
Balance, June 30, 2019 57,239,683
 $573
 $1,043,065
 $22,688
 $830,397
 $(60,112) $1,836,611
 $(223) $1,836,388
                   
  Three Months Ended June 30, 2019
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, March 31, 2019 56,941,493
 $569
 $1,038,494
 $2,256
 $800,511
 $(52,078) $1,789,752
 $(75) $1,789,677
Net income (loss) —
 —
 —
 —
 36,200
 —
 36,200
 (231) 35,969
Other comprehensive income —
 —
 —
 20,432
 —
 —
 20,432
 —
 20,432
Cash dividend, $0.12 per share —
 —
 —
 —
 (6,406) —
 (6,406) —
 (6,406)
Issuance of common stock including proceeds from exercise of common stock options 298,190
 4
 3,886
 —
 —
 —
 3,890
 —
 3,890
BNCL merger and related items —
 —
 —
 —
 92
 —
 92
 83
 175
Stock-based compensation expense —
 —
 685
 —
 —
 —
 685
 —
 685
Repurchases of common shares (2)
 —
 —
 —
 —
 —
 (8,034) (8,034) —
 (8,034)
Balance, June 30, 2019 57,239,683
 $573
 $1,043,065
 $22,688
 $830,397
 $(60,112) $1,836,611
 $(223) $1,836,388
(1)
Repurchase of common stock includes 271,340 shares repurchased in connection with the Company's share buyback program approved by the Board of Directors, and 132,993 shares repurchased to cover taxes due on the consideration transferred in the Beneficial acquisition related to the vesting of unrestricted Beneficial stock awards.
(2)
Repurchase of common stock includes 193,888 shares repurchased in connection with the Company's share buyback program approved by the Board of Directors.


  Six Months Ended June 30, 2018
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, December 31, 2017 56,279,527
 $563
 $336,271
 $(8,152) $669,557
 $(273,894) $724,345
 $—
 $724,345
Net income —
 —
 —
 —
 66,090
 —
 66,090
 —
 66,090
Other comprehensive loss —
 —
 —
 (17,581) —
 —
 (17,581) —
 (17,581)
Cash dividend, $0.20 per share —
 —
 —
 —
 (6,298) —
 (6,298) —
 (6,298)
Reclassification due to the adoption of ASU No. 2016-01 —
 —
 —
 20
 (20) —
 —
 —
 —
Issuance of common stock including proceeds from exercise of common stock options 405,857
 3
 7,059
 —
 —
 —
 7,062
 —
 7,062
Stock-based compensation expense —
 —
 1,420
 —
 —
 —
 1,420
 —
 1,420
Repurchases of common shares, 120,000 shares —
 —
 —
 —
 —
 (6,061) (6,061) —
 (6,061)
Balance, June 30, 2018 56,685,384
 $566
 $344,750
 $(25,713) $729,329
 $(279,955) $768,977
 $—
 $768,977
                   
  Three Months Ended June 30, 2018
(Dollars in thousands, except per share and share amounts) Shares Common Stock Capital in Excess of Par Value Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Total Stockholders' Equity of WSFS Non-controlling Interest Total Stockholders' Equity
Balance, March 31, 2018 56,394,559
 $564
 $339,829
 $(20,820) $704,081
 $(277,375) $746,279
 $—
 $746,279
Net income —
 —
 —
 —
 28,740
 —
 28,740
 —
 28,740
Other comprehensive loss —
 —
 —
 (4,913) —
 —
 (4,913) —
 (4,913)
Cash dividend, $0.11 per share —
 —
 —
 —
 (3,472) —
 (3,472) —
 (3,472)
Reclassification due to the adoption of ASU No. 2016-01 —
 —
 —
 20
 (20) —
 —
 —
 —
Issuance of common stock including proceeds from exercise of common stock options 290,825
 2
 4,447
 —
 —
 —
 4,449
 —
 4,449
Stock-based compensation expense —
 —
 474
 —
 —
 —
 474
 —
 474
Repurchases of common shares, 50,000 shares —
 —
 —
 —
 —
 (2,580) (2,580) —
 (2,580)
Balance, June 30, 2018 56,685,384
 $566
 $344,750
 $(25,713) $729,329
 $(279,955) $768,977
 $—
 $768,977

The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

WSFS FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 Nine Months Ended September 30, Six Months Ended June 30,
 2017 2016 2019 2018
(Dollars in thousands) (Unaudited) (Unaudited)
Operating activities:        
Net Income $60,076
 $45,970
Net income $48,899
 $66,090
Less: Net loss attributable to noncontrolling interest (324) —
Net income attributable to WSFS $49,223
 $66,090
Adjustments to reconcile net income to net cash provided by operating activities:        
Provision for loan losses 6,901
 7,862
 19,849
 6,148
Depreciation of premises and equipment, net 6,454
 5,587
 7,203
 4,189
Amortization of fees and discounts, net 15,002
 13,921
 24,079
 7,914
Amortization of intangible assets 2,352
 1,260
 5,658
 1,482
Gain on mortgage banking activities, net (4,785) (6,025)
Amortization of right of use lease asset 12,982
 —
Decrease in operating lease liability (4,405) —
Income from mortgage banking activities, net (4,938) (3,429)
Gain on sale of securities, net (1,764) (1,890) (78) (21)
Loss on sale of other real estate owned and valuation adjustments, net 187
 230
 63
 70
Debt extinguishment cost 695
 —
Stock-based compensation expense 1,235
 1,420
Unrealized gain on equity investments (4,831) (15,346)
Deferred income tax expense 3,097
 5,364
 1,205
 2,132
Increase in accrued interest receivable (762) (239) (1,284) (988)
(Increase) decrease in other assets (7,451) 8,028
Decrease in other assets 23,060
 1,827
Origination of loans held for sale (258,962) (252,368) (190,508) (178,182)
Proceeds from sales of loans held for sale 284,797
 230,864
 154,508
 177,997
Stock-based compensation expense 2,449
 2,253
Increase in accrued interest payable 2,731
 2,857
 5,164
 3,094
Increase (decrease) in other liabilities 962
 (2,286)
Increase in value of bank owned life insurance (899) (2,311)
Decrease in other liabilities (3,512) (13,526)
(Increase) decrease in value of bank owned life insurance (632) 779
Increase in capitalized interest, net (3,252) (3,834) (1,808) (1,815)
Net cash provided by operating activities $107,828
 $55,243
 $92,233
 $59,835
Investing activities:        
Purchases of investment securities held to maturity $—
 $(3,329)
Repayments, maturities and calls of investment securities held to maturity 1,175
 2,840
 8,235
 3,780
Sale of investment securities available for sale 415,486
 155,789
 602,432
 7,012
Purchases of investment securities available for sale (593,878) (254,993) (619,652) (206,667)
Repayments of investment securities available for sale 174,251
 62,798
 90,009
 50,233
Proceeds of bank owned life insurance death benefit 371
 —
Proceeds from bank-owned life insurance surrender 59,711
 96,429
Net increase in loans (231,955) (141,500) (20,646) (101,978)
Net cash for business combinations —
 51,788
Net cash from business combinations 76,072
 —
Purchases of stock of Federal Home Loan Bank of Pittsburgh (128,159) (57,308) (95,750) (92,211)
Redemptions of stock of Federal Home Loan Bank of Pittsburgh 133,130
 51,117
 122,317
 93,690
Sales of other real estate owned 4,405
 4,069
 1,610
 1,121
Investment in premises and equipment (7,336) (7,677) (5,510) (3,792)
Sales of premises and equipment 1,593
 —
 71
 157
Net cash used for investing activities $(230,917) $(136,406)
Net cash provided by (used in) investing activities $218,899
 $(152,226)

 Nine Months Ended September 30, Six Months Ended June 30,
 2017 2016 2019 2018
(Dollars in thousands) (Unaudited) (Unaudited)
Financing activities:        
Net increase in demand and saving deposits $320,784
 $221,336
Decrease in time deposits (36,055) (57,383)
Increase (decrease) in brokered deposits 35,079
 (12,091)
Decrease in loan payable (359) (366)
Net decrease in demand and saving deposits $(75,871) $(45,121)
Increase in time deposits 25,640
 61,196
(Decrease) increase in brokered deposits (81,028) 98,890
Receipts from FHLB advances 109,432,123
 90,314,153
 23,341,156
 68,146,387
Repayments of FHLB advances (109,588,547) (90,166,500) (23,553,946) (68,226,050)
Receipts from federal funds purchased and securities sold under agreement to repurchase 17,610,000
 21,676,620
Repayments of federal funds purchased and securities sold under agreement to repurchase (17,670,000) (21,723,820)
Receipts from federal funds purchased 15,056,950
 13,923,750
Repayments of federal funds purchased (15,099,925) (13,881,750)
Dividends paid (6,600) (5,437) (9,857) (6,298)
Issuance of common stock and exercise of common stock options 2,317
 1,918
 4,127
 7,062
Redemption of senior debt (55,000) —
Issuance of senior debt —
 97,849
Purchase of treasury stock (9,211) (12,890)
Net cash provided by financing activities $34,531
 $333,389
(Decrease) increase in cash and cash equivalents (88,558) 252,226
Change in noncontrolling interest (223) —
Purchase of common stock (17,087) (6,061)
Net cash (used in) provided by financing activities $(410,064) $72,005
Decrease in cash and cash equivalents (98,932) (20,386)
Cash and cash equivalents at beginning of period 821,923
 561,179
 620,757
 723,866
Cash and cash equivalents at end of period $733,365
 $813,405
 $521,825
 $703,480
Supplemental Disclosure of Cash Flow Information:    
Cash paid during the year for:    
Supplemental disclosure of cash flow information:    
Cash paid during the period for:    
Interest $21,893
 $13,238
 $30,771
 $17,967
Income taxes 20,861
 18,640
 15,987
 17,594
Non-cash information:        
Loans transferred to other real estate owned 4,925
 1,455
 2,098
 1,296
Loans transferred to portfolio from held-for-sale at fair value 12,782
 6,337
 14,846
 1,766
Net change in accumulated other comprehensive income 4,494
 13,163
Fair value of assets acquired, net of cash received —
 526,767
 5,033,367
 —
Fair value of liabilities assumed —
 583,517
 5,109,931
 —
Goodwill adjustments, net (1,532) (1,496)
Impact of ASC 842 Adoption:    
Right of use asset 121,288
 —
Lease liability (132,346) —
The accompanying notes are an integral part of these unaudited Consolidated Financial Statements.

WSFS FINANCIAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20172019
(UNAUDITED)
1. BASIS OF PRESENTATION
General
Our unaudited Consolidated Financial Statements include the accounts of WSFS Financial Corporation (the Company or WSFS), Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), WSFS Wealth Management, LLC (Powdermill), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress) and Christiana Trust Company of Delaware (Christiana Trust DE). We also have one unconsolidated subsidiary, WSFS Capital Trust III. WSFS Bank has three wholly-ownedfour wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), WSFS Investment Group, Inc. (WSFS Wealth Investments,Investments), 1832 Holdings, Inc., and Monarch EntityWSFS SPE Services, LLC.LLC, and one majority-owned subsidiary, NewLane Finance Company.
Overview
Founded in 1832, the Bank is one of the ten oldest bank and trust companies continuously operating under the same name in the United States (U.S.). We provide residential and commercial real estate, commercial and consumer lending services, as well as retail deposit and cash management services. Lending activities areOur core banking business is commercial lending funded primarily with customer deposits and borrowings.by customer-generated deposits. In addition, we offer a variety of wealth management and trust services to personal and corporate customers. The Federal Deposit Insurance Corporation (FDIC) insures our customers’ deposits to their legal maximums. We serve our customers primarily from our 77147 offices located in Pennsylvania (72), Delaware (46)(49), Pennsylvania (29)New Jersey (24), Virginia (1) and Nevada (1) and through our website at www.wsfsbank.com. Information on our website is not incorporated by reference into this quarterly report.Quarterly Report on Form 10-Q.
Our leasing business is conducted by NewLane Finance Company (formerly Neumann Finance Company) and BEFC. Newlane Finance Company originates small business leases and provides financing products and services to businesses nationwide targeting various equipment categories including technology, software, office, medical and other areas. BEFC originates small business leases, primarily medical and veterinary equipment. During the second quarter of 2019, WSFS Bank announced its intention to combine the operations of NewLane Finance Company and BEFC later in 2019.
Basis of Presentation
In preparing the unaudited Consolidated Financial Statements, we are required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Amounts subject to significant estimates include the allowance for loan and lease losses and reserves for lending relatedlending-related commitments, goodwill, intangible assets, post-retirement benefit obligations, the fair value of financial instruments, income taxes and other-than-temporary impairment (OTTI), and the income tax valuation allowance.. Among other effects, changes to these estimates could result in future impairments of investment securities, goodwill and intangible assets, andthe establishment of the allowance and lending relatedlending-related commitments as well as increased post-retirement benefits expense.
Our accounting and reporting policies conform to Generally Accepted Accounting Principles (GAAP) in the U.S. (GAAP), prevailing practices within the banking industry for interim financial information and Rule 10-01 of SEC Regulation S-X (Rule 10-01). Rule 10-01 does not require us to include all information and notes that would be required in audited financial statements. Certain prior period amounts have been reclassified to conform with current period presentation. Operating results for the periods presented are not necessarily indicative of the results that may be expected for any future quarters or for the year ending December 31, 2017.2019. These unaudited, interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 20162018 (the "20162018 Annual Report on Form 10-K")10-K) that was filed with the SEC on March 1, 2017February 28, 2019 and is available at www.sec.gov or on our website at http://investors.wsfsbank.com/financials.cfm.www.wsfsbank.com. All significant intercompany transactions were eliminated in consolidation.
Business Combinations

On March 1, 2019, we acquired Beneficial Bancorp, Inc. (Beneficial), including its subsidiary Beneficial Bank, a community bank headquartered in Philadelphia, Pennsylvania, creating the largest, premier, locally-headquartered bank in the Greater Delaware Valley. Beneficial merged with and into WSFS, with WSFS continuing as the surviving corporation and simultaneously, Beneficial Bank merged with and into WSFS Bank, with WSFS Bank continuing as the surviving bank. This acquisition grew our market share, deepened our presence in the Philadelphia, southeastern Pennsylvania and New Jersey markets, and enhanced our customer base. The results of Beneficial's operations are included in our unaudited Consolidated Financial Statements since the date of the acquisition. See Note 3 for further information.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies:
The significant accounting policies used in preparation of our Consolidated Financial Statements are disclosed in our 20162018 Annual Report on Form 10-K. There have not been any material changes in ourThose significant accounting policies from those disclosedremain unchanged at June 30, 2019, except as described below:
Leases
We account for our leases in accordance with ASC 842 - Leases. Most of our 2016 Annual Reportleases are recognized on Form 10-K.the balance sheet by recording a right-of-use asset and lease liability for each lease. The right-of-use asset represents the right to use the asset under lease for the lease term, and the lease liability represents the contractual obligation to make lease payments.
Senior Debt
On September 1, 2017, we redeemed $55.0 million in aggregate principalAs a lessee, WSFS enters into operating leases for certain bank branches, office space, and office equipment. The right-of-use assets and lease liabilities are initially recognized based on the net present value of the remaining lease payments which include renewal options where management is reasonably certain they will be exercised. The net present value is determined using the incremental collateralized borrowing rate at commencement date. The right-of-use asset is measured at the amount of the lease liability adjusted for any prepaid rent, lease incentives and initial direct costs incurred. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
As a lessor, WSFS provides direct financing to our 6.25% senior notes due 2019 which were issued in 2012 (the 2012 senior notes). The 2012 senior notes were repaid using a portioncustomers through our equipment and small-business leasing business. Direct financing leases are recorded at the aggregate of minimum lease payments net of unamortized deferred lease origination fees and costs and unearned income. Interest income on direct financing leases is recognized over the term of the proceeds from our 2016 issuance of senior unsecured fixed-to-floating rate notes (the 2016 senior notes) described below. We recorded noninterest expense of $0.7 million duelease. Origination fees and costs are deferred, and the net amount is amortized to interest income over the write-off of unamortized debt issuance costs in connection with this redemption.
On June 13, 2016, the Company issued $100.0 millionestimated life of the 2016 senior notes. The 2016 senior notes mature on June 15, 2026 and have a fixed coupon rate of 4.50% from issuance until June 15, 2021 and a variable coupon rate of three month LIBOR plus 3.30% from June 15, 2021 until maturity. The 2016 senior notes may be redeemed beginning on June 15, 2021 at 100% of principal plus accrued and unpaid interest. The net proceeds from the issuance of the 2016 senior notes are being used for general corporate purposes.lease.

Acquisitions in 2016
On August 12, 2016, we completed the acquisition of Penn Liberty Financial Corp. (Penn Liberty), a community bank headquartered in Wayne, Pennsylvania in order to build our market share, deepen our presence in the southeastern Pennsylvania market, and enhance our customer base. The results of Penn Liberty’s operations are included in our Consolidated Financial Statements since the date of the acquisition. See Note 2 – Business Combinations for further information.
During the third and fourth quarters of 2016, respectively, we acquired the assets of Powdermill Financial Solutions LLC, a multi-family office serving an affluent clientele in the local community and throughout the U.S., and West Capital Management, Inc., an independent, fee-only wealth management firm providing fully customized solutions tailored to the unique needs of institutions and high-net-worth individuals which operates under a multi-family office philosophy. These acquisitions align with our strategic plan to expand our wealth management offerings and to diversify our fee-income generating businesses.
Correction of Prior Period Balances
Consolidated Statements of Income: The Consolidated Statements of Income for the three and nine months ended September 30, 2016 have been revised to correct an immaterial error in Noninterest income - Other income and Noninterest expense - Other operating expense related to revenue earned for cash servicing fees. As a result, the Consolidated Statements of Income have been revised to reflect these changes, as follows:
  Three months ended September 30, 2016 Nine months ended September 30, 2016
(Dollars in thousands) As originally reported Adjustments As revised As originally reported Adjustments As revised
Noninterest income - Other income $4,125
 $737
 $4,862
 $12,017
 $1,994
 $14,011
Noninterest expense - Other operating expense 8,074
 737
 8,811
 22,558
 1,994
 24,552
The above revisions had no effect on earnings per share or retained earnings. Periods not presented herein will be revised, as applicable, as they are included in future filings.


RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Guidance Adopted in 20172019
In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-05: Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, which amends Accounting Standards Codification (ASC) Topic 815: Derivatives and Hedging. This new guidance clarifies that the novation of a derivative contract (i.e., a change in the counterparty) in a hedge accounting relationship does not, in and of itself, cause a hedge accounting relationship to be discontinued because it does not represent a termination of the original derivative instrument or a change in the critical terms of the hedge relationship. This new guidance is effective for annual reporting periods beginning after December 15, 2016 and may be adopted prospectively or retroactively. Early adoption is permitted, including adoption in an interim period. The Company adopted this accounting guidance during the quarter ended March 31, 2017 on a prospective basis with no impact to our Consolidated Financial Statements.
In March 2016, the FASB issued ASU No. 2016-06, Contingent Put and Call Options in Debt Instruments, Derivatives and Hedging2016-02, Leases (Topic 815). ASU 2016-06 clarifies that determining whether the economic characteristics of a put or call are clearly and closely related to its debt host requires only an assessment of the four-step decision sequence outlined in FASB ASC paragraph 815-15-25-24. Additionally, entities are not required to separately assess whether the contingency itself is clearly and closely related. The standard is effective for public business entities in interim and annual periods in fiscal years beginning after December 15, 2016. Early adoption is permitted in any interim period for which the entity’s financial statements have not been issued, but would be retroactively applied to the beginning of the year that includes the interim period. The standard requires a modified retrospective transition approach, with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. For instruments that are eligible for the fair value option, an entity has a one-time option to irrevocably elect to measure the debt instrument affected by the standard in its entirety at fair value with changes in fair value recognized in earnings. The Company adopted this accounting guidance during the quarter ended March 31, 2017 with no impact on our Consolidated Statements of Income or Consolidated Statements of Financial Condition.

In March 2016, the FASB issued ASU No. 2016-07, Simplifying the Transition to the Equity Method of Accounting, Investments - Equity Method and Joint Ventures (Topic 323). ASU 2016-07 eliminates the requirement for an investor to retroactively apply the equity method when its increase in ownership interest (or degree of influence) in an investee triggers equity method accounting. The standard is effective for all entities in annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is permitted. The new guidance will be applied prospectively to changes in ownership (or influence) after the adoption date. The Company adopted this accounting guidance during the quarter ended March 31, 2017 on a prospective basis with no impact to our Consolidated Financial Statements.
Accounting Guidance Pending Adoption at September 30, 2017

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU supersedes the revenue recognition requirements in ASC 605, Revenue Recognition. ASU No. 2014-09 will require an entity to recognize revenue when it transfers promised goods or services to customers using a five-step model that requires entities to exercise judgment when considering the terms of the contracts. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606)842): Deferral of the Effective Date. This amendment defers the effective date of ASU 2014-09 by one year. In March 2016, the FASB issued ASU 2016-08, Principal versus Agent Considerations (Reporting Gross versus Net), which amends the principal versus agent guidance and clarifies that the analysis must focus on whether the entity has control of the goods or services before they are transferred to the customer. In addition, the FASB issued ASU Nos. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers and 2016-12, Narrow-Scope Improvements and Practical Expedients, both of which provide additional clarification of certain provisions in Topic 606. These ASC updates are effective for public business entities in annual and interim reporting periods in fiscal years beginning after December 15, 2017. Early application is permitted for all entities, but not before annual reporting periods beginning after December 15, 2016. The standard permits the use of either the retrospective or retrospectively with the cumulative effect transition method. The Company will adopt the standard on January 1, 2018 using the retrospective with the cumulative effect transition method. For revenue streams determined to be within the scope of the standard, we have substantially completed our impact analysis, the results of which has shown an immaterial effect on our Consolidated Financial Statements. The Company is in the process of updating our accounting policies, processes and related internal controls to incorporate the changes from the standard. Topic 606 also includes expanded disclosure requirements which we are currently in the process of drafting. Although the impact of this adoption is expected to be immaterial on our financial statements, we do anticipate adding additional detail to our revenue disclosures.
In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities. This amendment requires that equity investments be measured at fair value with changes in fair value recognized in net income. When fair value is not readily determinable an entity may elect to measure the equity investment at cost, minus impairment, plus or minus any change in the investment’s observable price. For financial liabilities that are measured at fair value, the amendment requires an entity to present separately, in other comprehensive income, any change in fair value resulting from a change in instrument specific credit risk. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Entities may apply this guidance on a prospective or retrospective basis. The Company will adopt the standard on a prospective basis and does not expect the prospective application of this guidance to have a material impact on its Consolidated Financial Statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU revises the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for substantially all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. ASU 2016-02 is effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. Adoption using the comparative modified retrospective transition approach is required for leases existing at, or entered into after,required; however, in July 2018, the beginning of the earliestFASB issued ASU 2018-11, Leases-Targeted Improvements, which provides an optional transition method whereby comparative periodperiods presented in the financial statements.statements in the period of adoption do not need to be restated under Topic 842. The Company does not plan to early adopt this guidance and is currently in the process of identifying our complete lease population as defined by this guidance. The Company is also evaluating our internal systems, accounting policies, processes and related internal controls for potential impacts. Our preliminary review of this guidance suggests that adoption will result in additional assets and liabilities on our Consolidated Balance Sheet. The Company will adoptadopted this guidance on January 1, 2019.2019 using the transition option in ASU 2018-11 and the results of this adoption are recorded in the Consolidated Statements of Financial Condition. See Note 9 for additional disclosures resulting from our adoption of this standard.

ASU No. 2019-01, Leases (Topic 842): Codification Improvements:Subsequent to adopting ASU 2016-02, in March 2019, the FASB issued ASU No. 2019-01, Leases (Topic 842): Codification Improvements, which makes targeted changes to lessor accounting and clarifies interim transition disclosure requirements upon adopting Topic 842. The guidance is effective for annual periods beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance on March 31, 2019. See Note 9 for additional disclosures resulting from our adoption of this standard.

ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities:In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities. The new guidance requires the amortization period for certain non-contingent callable debt securities held at a premium to end at the earliest call date of the debt security. If the call option is not exercised at the earliest call date, the guidance requires the debt security's effective yield to be reset based on the contractual payment terms of the debt security. The guidance is effective in annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted. Use of the modified retrospective method, with a cumulative-effect adjustment to retained earnings is required. The Company adopted this standard on January 1, 2019, on a modified retrospective basis and the adoption did not have an effect on the Consolidated Financial Statements.

ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815):In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities (Topic 815). The new guidance changes both the designation and measurement guidance for qualifying hedging relationships and simplifies the presentation of hedge results. Specifically, the guidance eliminates the requirement to separately measure and report hedge ineffectiveness and also aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Further, the new guidance provides entities the ability to apply hedge accounting to additional hedging strategies as well as permits a one-time reclassification of eligible to be hedged instruments from held to maturity to available for sale upon adoption. The guidance is effective in annual and interim periods beginning after December 15, 2018. Early adoption is permitted. Adoption using the modified retrospective approach is required for hedging relationships that exist as of the date of adoption; presentation and disclosure requirements are applied prospectively. The Company adopted this standard on January 1, 2019 on a modified retrospective basis for existing hedging relationships and on a prospective basis for presentation and disclosure requirements. The adoption of this standard did not have an effect on the Consolidated Financial Statements. See Note 15 for additional disclosures resulting from our adoption of this standard.

ASU No. 2018-16 Derivatives and Hedging - Inclusion of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815):In October 2018, the FASB issued ASU No. 2018-16 Derivatives and Hedging - Inclusion of the Secured Overnight Financial Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes (Topic 815). The new guidance applies to all entities that elect to apply hedge accounting to benchmark interest rate hedges under Topic 815. It permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes in addition to the existing applicable rates. The guidance is required to be adopted concurrently with ASU 2017-12, on a prospective basis for qualifying new or redesignated hedging relationships entered into on or after adoption. The Company adopted this standard on January 1, 2019 on a prospective basis and the adoption did not have an effect on the Consolidated Financial Statements.
Accounting Guidance Pending Adoption at June 30, 2019

ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 replaces the incurred loss impairment methodology in current GAAP with anthe current expected credit losslosses (CECL) methodology and requires consideration of a broader range of information to determine credit loss estimates. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. Purchased credit impaired loans will receive an allowance account at the acquisition date that represents a component of the purchase price allocation. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses, with such allowance limited to the amount by which fair value is below amortized cost. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, which clarifies that receivables arising from operating leases are not within the scope of Topic 326. In December 2018, regulators issued a final rule related to regulatory capital (Regulatory Capital Rule: Implementation and Transition of the Current Expected Credit Losses Methodology for Allowances and Related Adjustments to the Regulatory Capital Rule and Conforming Amendments to Other Regulations) which is intended to provide regulatory capital relief to entities transitioning to CECL. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides entities the option to irrevocably elect the fair value option on financial instruments within the scope of both ASC 326-20 and ASC 825-10 upon adoption of ASU 2016-13.

This guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. The Company does not plan to early adopt this guidance and will adopt this guidance on January 1, 2020. A cross-functional team from Finance, Credit, and Information Technology is inleading the early stages of evaluatingimplementation efforts to evaluate the impact of this guidance on itsthe Company’s Consolidated Financial Statements, internal systems, accounting policies, processes and related internal controls. Our preliminaryWe have completed the implementation of our software solution and a third-party specialist has completed an independent model review of thisthe solution. We continue to focus on our evaluation of acceptable methodologies, accounting policies, and reporting requirements under the guidance suggestsas well as implementation and transition rules issued by regulators. As necessary, we will continue to consult with third-party experts and specialists to assist with our implementation efforts. Our implementation efforts to date suggest that adoption may materially increase the allowance for loan losses and decrease capital levels; however, the extent of these impacts will depend on the composition and asset quality of the portfolio, macroeconomic conditions, and significant estimates and judgments made by management at the time of adoption. The Company will adopt this guidance on January 1, 2020.

ASU No. 2018-13, Fair Value Measurement Disclosure Framework: In August 2016,2018, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash ReceiptsNo. 2018-13, Fair Value Measurement Disclosure Framework, which amends ASC 820 - Fair Value Measurement. The new guidance modifies, adds and Cash Payments. ASU 2016-15 representsremoves certain disclosures aimed to improve the Emerging Issues Task Force’s final consensus on eight issues related to the classification of cash payments and receipts in the statement of cash flows for a number of common transactions. The consensus also clarifies when identifiable cash flows should be separated versus classified based on their predominant source or use. This guidance is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company does not expect the application of this guidance to have any impact on its Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 provides a new, two-step framework for determining whether a transaction is accounted for as an acquisition (or disposal) of assets or a business. The first step is evaluating whether substantially alloverall usefulness of the disclosure requirements for fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the transaction is not considered a business. Also, in order to be considered a business, the transaction would need to include an input and a substantive process that together significantly contribute to the ability to create outputs.measurements. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted for transactions that have not been reported in financial statements that have been issued or been made available for issuance. The Company does not expect the application of this guidance to have any impact on its Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 simplifies the measurement of goodwill impairment by removing the hypothetical purchase price allocation. The new guidance requires an impairment of goodwill be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, up to the amount of goodwill recorded. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017.permitted. Adoption is required on either a prospective or retrospective basis, depending on the amendment. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.

ASU No. 2018-14, Compensation-Retirement Benefits - Defined Benefit Plans-General (Topic 715): In February 2017,August 2018, the FASB issued ASU No. 2017-05, Clarifying2018-14, Compensation-Retirement Benefits - Defined Benefit Plans-General (Topic 715) which applies to all employers that provide defined benefit pension or other postretirement benefit plans for their employees. The new guidance modifies, adds and removes certain disclosures aimed to improve the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. ASU 2017-05 provides clarificationoverall usefulness of the scope of ASC 610-20. Specifically, the new guidance clarifies that ASC 610-20 appliesdisclosure requirements to nonfinancial assets which do not meet the definition of a business or not-for-profit activity. Further, the new guidance clarifies that a financial asset is within the scope of ASC 610-20 if it meets the definition of an in-substance nonfinancial asset which is defined as a financial asset promised to a counterparty in a contract where substantially all of the assets promised are nonfinancial. Finally, the new guidance clarifies that each distinct nonfinancial asset and in-substance nonfinancial asset should be derecognized when the counterparty obtains control of it.statement users. The guidance is effective for public entities in annual and interim reporting periods in fiscal years beginning after December 15, 2017. Early application is permitted for all entities, but not before annual reporting periods beginning after December 15, 2016. The Company is currently evaluating the impact of adopting ASU 2017-05 on its Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The new guidance requires that the service cost component of net periodic pension cost be disclosed with other compensation costs in the income statement. For all other cost components, an entity must either separately disclose the other cost components in separate line item(s) outside a subtotal of income from operations in the income statement or disclose the line item(s) used to present the other cost components in the income statement. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.

In March 2017, the FASB issued ASU No. 2017-08, Premium Amortization on Purchased Callable Debt Securities. The new guidance requires the amortization period for certain non-contingent callable debt securities held at a premium to end at the earliest call date of the debt security. If the call option is not exercised at the earliest call date, the guidance requires the debt security's effective yield to be reset based on the contractual payment terms of the debt security. The guidance is effective for public entities in annual and interim periods in fiscal years beginning after December 15, 2018.2020. Early adoption is permitted. Use of the modified retrospective method with a cumulative-effect adjustment to retained earnings, is required. In the period of adoption, a change in accounting principle disclosure is required. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.
ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350):In May 2017,August 2018, the FASB issued ASU No. 2017-09, Scope of Modification Accounting2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350). The new guidance clarifies when changesprovides clarity on capitalizing and expensing implementation costs for cloud computing arrangements in a service contract. If an implementation cost is capitalized, the cost should be recognized over the noncancellable term and periodically assessed for impairment. The guidance is effective in annual and interim periods in fiscal years beginning after December 15, 2019. Early adoption is permitted. Adoption should be applied retrospectively or prospectively to the terms or conditions of a share-based payment award must be accounted for as modifications. If the award’s fair value, vesting conditions and classification remain the same immediately before andall implementation costs incurred after the change, modification accounting is not applied. Additionally,date of adoption. Our preliminary review of this guidance to date suggests that adoption may result in a material amount of implementation costs being deferred; however, the guidance does not require valuation before or after the change if the change does not affect anyextent of the inputsimpact will depend on the cloud computing implementations occurring at the time of adoption.
ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments: In April 2019, the model usedFASB issued ASU No. 2019-04, Codification Improvements to valueTopic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The new guidance amends ASU 2016-13 to address topics related to accrued interest receivables, recoveries, disclosures, and certain other clarifications. The new guidance also amends ASU 2017-12 to provide clarification on certain hedge accounting topics and transition requirements amended by ASU 2017-12. Lastly, the award.new guidance amends ASU 2016-01 to add clarification requiring remeasurement under ASC 820 when using the measurement alternative, among certain other clarifications. The guidance is effective for all entities in annual and interim periods beginning after December 15, 2017.2019. Early adoption is permitted. The new guidance will be appliedAdoption is required on a prospective, modified-retrospective or retrospective basis, depending on the amendment. The Company will evaluate the amendments to awards modified on or afterASU 2016-13 in conjunction with our overall evaluation of ASU 2016-13. For other amendments within this guidance, the adoption date. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.
In August 2017,

3. BUSINESS COMBINATIONS
Beneficial Bancorp, Inc.
On March 1, 2019, we acquired Beneficial. Subject to the FASB issued ASU No. 2017-12, Targeted Improvements to Accounting for Hedging Activities. The new guidance changes both the designationterms and measurement guidance for qualifying hedging relationships and the presentation of hedge results. Specifically, the guidance eliminates the requirement to separately measure and report hedge ineffectiveness and also aligns the recognition and presentationconditions of the effectsmerger agreement, the Beneficial stockholders received 0.3013 shares of WSFS common stock and $2.93 in cash for each share of Beneficial common stock. Based on the February 28, 2019 closing share price of $43.28, the value of the hedging instrumentstock consideration was $950.0 million and cash consideration was $228.2 million, for total transaction value of $1.2 billion. Results of the hedged itemcombined entity’s operations are included in our Consolidated Financial Statements since the date of the acquisition.
Beneficial conducted its primary business operations through its wholly owned subsidiary, Beneficial Bank, which was merged into WSFS Bank. At closing, Beneficial had 74 branches and offices in southeastern Pennsylvania and southern New Jersey. WSFS acquired Beneficial to expand the scale and efficiency of its operations in the financial statements. Additionally,Philadelphia, southeastern Pennsylvania and New Jersey markets, and to create opportunities to generate additional revenue by providing its full suite of banking, mortgage banking, wealth management and insurance services to the new guidance provides entities the ability to apply hedge accounting to additional hedging strategies. The guidance is effective for all entities in annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company does not expect the application of this guidance to have a material impact on its Consolidated Financial Statements.legacy Beneficial markets.


2. BUSINESS COMBINATIONS
Penn Liberty Financial Corporation
On August 12, 2016, we completed the acquisition of Penn Liberty. The acquisition of Penn LibertyBeneficial was accounted for as a business combination using the acquisition method of accounting and, accordingly, the assets acquired, liabilities assumed and consideration transferred were recorded at their estimated fair values as of the acquisition date. The excess of consideration transferred over the fair value of net assets acquired was recorded as goodwill, which is not amortizable nor deductible for tax purposes. The Company allocated the total balance of goodwill to its WSFS Bank segment. While the valuation of acquired assets and liabilities is nearly completed, the values of certain assets and liabilities are preliminary in nature, and are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the acquisition date. When the valuation is final, any changes to the preliminary valuation of acquired assets and liabilities could result in adjustments to identified intangibles and goodwill. The fair values of assets acquired and liabilities assumed are now considered final.is expected to be finalized during the measurement period, which ends one year from the closing date.
In connection with the acquisition of Penn Liberty,The following table summarizes the consideration transferred and the fair valuevalues of the identifiable assets acquired and liabilities assumed, including remeasurement adjustments subsequent to the date of acquisition, are summarized in the following table:
assumed:
(Dollars in thousands)Fair Value
Consideration Transferred: 
Common shares issued (21,816,355)$949,968
Cash paid to Beneficial stock and option holders228,239
Value of consideration1,178,207
Assets acquired: 
Cash and due from banks304,311
Investment securities619,880
Loans and leases, net3,711,246
Premises and equipment69,873
Deferred income taxes18,739
Bank owned life insurance82,510
Core deposit intangible85,053
Servicing rights intangible2,466
Other assets135,895
Total assets5,029,973
Liabilities assumed: 
Deposits4,056,506
Other liabilities102,965
Total liabilities4,159,471
Net assets acquired:870,502
Goodwill resulting from acquisition of Beneficial$307,705

(Dollars in thousands) Fair Value
Consideration Transferred:  
Common shares issued (1,806,748) $68,352
Cash paid to Penn Liberty stock and option holders 40,549
Value of consideration 108,901
Assets acquired:  
Cash and due from banks 102,301
Investment securities 627
Loans 483,203
Premises and equipment 6,817
Deferred income taxes 6,542
Bank owned life insurance 8,666
Core deposit intangible 2,882
Other real estate owned 996
Other assets 12,085
Total assets 624,119
Liabilities assumed:  
Deposits 568,706
Other borrowings 10,000
Other liabilities 3,738
Total liabilities 582,444
Net assets acquired: 41,675
Goodwill resulting from acquisition of Penn Liberty $67,226


The following table details the change to goodwill recorded subsequent to acquisition:
(Dollars in thousands) Fair Value
Goodwill resulting from the acquisition of Beneficial reported as of March 31, 2019 $309,486
Effects of adjustments to:  
Cash and due from banks 246
Investment securities (3,177)
Loans 911
Premises and equipment (741)
Deferred income taxes 731
Other assets (420)
Deposits 790
Other liabilities (121)
Adjusted goodwill resulting from the acquisition of Beneficial as of June 30, 2019 $307,705

(Dollars in thousands) Fair Value
Goodwill resulting from the acquisition of Penn Liberty reported as of December 31, 2016 $68,814
Effects of adjustments to:  
Deferred income taxes 880
Loans 279
Other assets (1,440)
Other liabilities (1,307)
Adjusted goodwill resulting from the acquisition of Penn Liberty as of September 30, 2017 $67,226

In many cases, the fair values of the assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates.

Acquired loans are initially recorded at their fair values as of the acquisition date. The fair value is based on a discounted cash flow methodology that uses assumptions as to credit risk, default rates, collateral values, and loss severity, along with estimated prepayment rates. Loans that have deteriorated in credit quality since their origination, and for which it is probable that all contractual cash flows will not be received, are accounted for in accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. For additional information regarding purchased impaired loans, see Note 7 to the unaudited Consolidated Financial Statements.

The Company acquired Beneficial’s investment portfolio with a fair value of $619.9 million, of which $578.8 million of investment securities were sold subsequent to closing. The proceeds received for the investments sold approximated their fair values as of the acquisition date. The fair value of the retained investment portfolio was determined by taking into account market prices obtained from independent valuation source(s). See Note 14 for additional information.

The Company recorded a deferred income tax asset (DTA) of $18.7 million related to tax attributes of Beneficial along with the effects of fair value adjustments resulting from acquisition accounting for the combination.

WSFS recorded $85.1 million of core deposit intangibles which are being amortized over ten years using a straight-line amortization methodology. The fair value of core deposit intangibles was determined based on modeling assumptions that take into consideration customer attrition, deposit interest rates, and alternative costs of funds.

Certificates of deposit accounts were valued by segregating the portfolio into pools based on remaining maturity and comparing the contractual cost of the portfolio to an identical portfolio bearing current market rates. The valuation adjustment will be accreted or amortized to interest expense over the remaining maturities of the respective pools.

Direct costs related to the acquisition were expensed as incurred. As a result of the merger, the Company developed a comprehensive integration plan under which we have begun to incur costs, including costs to terminate contracts, consolidate facilities and relocate Associates. Costs related to the acquisition and restructuring are presented in the “Corporate Development” and “Restructuring” expense line items, respectively, on the Consolidated Statements of Income.

During the three months ended September 30, 2017, no adjustments were madefourth quarter of 2018, WSFS announced a retail banking office optimization plan that includes the consolidation of fourteen Beneficial and eleven WSFS Bank banking offices, which we expect to goodwill resulting frombegin during the acquisitionthird quarter of Penn Liberty.2019. Additionally, during the second quarter, WSFS completed the sale of five Beneficial retail banking offices in New Jersey to the Bank of Princeton, a New Jersey-based financial institution, at a deposit premium of 7.37%.



3.4. NONINTEREST INCOME
Credit/debit card and ATM income
The following table presents the components of credit/debit card and ATM income:
 Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands)2019 2018 2019 2018
Bailment fees$6,908
 $6,588
 $13,807
 $12,681
Interchange fees6,452
 3,847
 10,839
 7,307
Other card and ATM fees317
 274
 546
 526
Total credit/debit card and ATM income$13,677
 $10,709
 $25,192
 $20,514

Credit/debit card and ATM income is composed of bailment fees, interchange fees, and other card and ATM fees. Bailment fees are earned from bailment arrangements with our customers. Bailment arrangements are legal relationships in which property is delivered to another party without a transfer of ownership. The party who transferred the property (the bailor) retains ownership interest of the property. In the event that the bailee files for bankruptcy protection, the property is not included in the bailee's assets. The bailee pays an agreed-upon fee for the use of the bailor's property in exchange for the bailor allowing use of the assets at the bailee's site. Bailment fees are earned from cash that is made available for customers' use at an offsite location, such as cash located in an ATM at a customer's place of business. These fees are typically indexed to a market interest rate. This revenue stream generates fee income through monthly billing for bailment services.
Credit/debit card and ATM income also includes interchange fees. Interchange fees are paid by a merchant's bank to a bank that issued a debit or credit card used in a transaction to compensate the issuing bank for the value and benefit the merchant receives from accepting electronic payments. These revenue streams generate fee income at the time a transaction occurs and are recorded as revenue at the time of the transaction.
Investment management and fiduciary income
The following table presents the components of investment management and fiduciary income:
 Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands)2019 2018 2019 2018
Trust fees$6,685
 $6,118
 $13,250
 $11,366
Wealth management and advisory fees3,697
 4,126
 7,279
 8,067
Total investment management and fiduciary income$10,382
 $10,244
 $20,529
 $19,433

Investment management and fiduciary income is composed of trust fees and wealth management and advisory fees. Trust fees are based on revenue earned from custody, escrow and trustee services on structured finance transactions; indenture trustee, administrative agent and collateral agent services to institutions and corporations; commercial domicile and independent director services; and investment and trustee services to families and individuals across the U.S. Most fees are flat fees, except for a portion of personal and corporate trustee fees where we earn a percentage on the assets under management. This revenue stream primarily generates fee income through monthly, quarterly and annual billings for services provided.
Wealth management and advisory fees consists of fees from Cypress, West Capital, Powdermill, WSFS Wealth Client Management, WSFS Wealth Investments and WSFS Institutional Services. Wealth management and advisory fees are based on revenue earned from services including asset management, financial planning, family office, and brokerage.  The fees are based on the market value of assets, are assessed as a flat fee, or are brokerage commissions. This revenue stream primarily generates fee income through quarterly and annual billing for the services.


Deposit service charges
The following table presents the components of deposit service charges:
 Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands)2019 2018 2019 2018
Service fees$3,179
 $2,634
 $5,895
 $5,214
Return and overdraft fees2,696
 1,893
 4,544
 3,777
Other deposit service fees228
 137
 410
 303
Total deposit service charges$6,103
 $4,664
 $10,849
 $9,294

Deposit service charges includes revenue earned from our core deposit products, certificates of deposit, and brokered deposits. We generate revenues from deposit service charges primarily through service charges and overdraft fees. Service charges consist primarily of monthly account maintenance fees, cash management fees, foreign ATM fees and other maintenance fees. All of these revenue streams generate fee income through service charges for monthly account maintenance and similar items, transfer fees, late fees, overlimit fees, and stop payment fees. Revenue is recorded at the time of the transaction.
Other income
The following table presents the components of other income:
 Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands)2019 2018 2019 2018
Managed service fees$3,624
 $3,105
 $6,566
 $5,931
Currency preparation851
 818
 1,590
 1,543
ATM insurance652
 605
 1,280
 1,195
Miscellaneous products and services2,607
 2,583
 6,005
 4,350
Total other income$7,734
 $7,111
 $15,441
 $13,019

Other income consists of managed service fees, which are primarily courier fees related to cash management, currency preparation, ATM insurance and other miscellaneous products and services offered by the Bank. These fees are primarily generated through monthly billings or at the time of the transaction. For the six months ended June 30, 2019, "Miscellaneous products and services" included income related to a non-recurring transfer of client accounts to a departing Wealth investment adviser, in accordance with the buy-out provisions of the adviser's contract.
Arrangements with multiple performance obligations
Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to customers.
Practical expedients and exemptions
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

See Note 16 for further information about the disaggregation of noninterest income by segment.

5. EARNINGS PER SHARE
The following table shows the computation of basic and diluted earnings per share:
 Three Months Ended June 30, Six Months Ended June 30,
(Dollars and shares in thousands, except per share data)2019 2018 2019 2018
Numerator:       
Net income attributable to WSFS$36,200
 $28,740
 $49,223
 $66,090
Denominator:       
Weighted average basic shares53,253
 31,567
 46,103
 31,497
Dilutive potential common shares263
 697
 335
 729
Weighted average fully diluted shares$53,516
 $32,264
 $46,438
 $32,226
Earnings per share:       
Basic$0.68
 $0.91
 $1.07
 $2.10
Diluted$0.68
 $0.89
 $1.06
 $2.05
Outstanding common stock equivalents having no dilutive effect1
 11
 1
 23


 Three Months Ended September 30, Nine Months Ended September 30,
(Dollars and Shares in thousands, except per share data)2017 2016 2017 2016
Numerator:       
Net income$20,569
 $12,722
 $60,076
 $45,970
Denominator:       
Weighted average basic shares31,420
 30,520
 31,424
 29,914
Dilutive potential common shares848
 797
 856
 747
Weighted average fully diluted shares32,268
 31,317
 32,280
 30,661
Earnings per share:       
Basic$0.65
 $0.42
 $1.91
 $1.54
Diluted$0.64
 $0.41
 $1.86
 $1.50
Outstanding common stock equivalents having no dilutive effect—
 1
 5
 10


4.6. INVESTMENT SECURITIES
The following tables detail the amortized cost and the estimated fair value of our investments in available-for-sale and held-to-maturity investment securities.debt securities as well as our equity investments. None of our investmentinvestments in debt securities are classified as trading.
(Dollars in thousands) Amortized Cost 
Gross
Unrealized
 Gain
 
Gross
Unrealized
 Loss
 
Fair
Value
Available-for-Sale Securities:        
September 30, 2017        
CMO $269,267
 $895
 $2,354
 $267,808
FNMA MBS 434,920
 1,545
 5,223
 431,242
FHLMC MBS 85,564
 277
 779
 85,062
GNMA MBS 25,723
 289
 315
 25,697
Other investments 640
 —
 16
 624
  $816,114
 $3,006
 $8,687
 $810,433
December 31, 2016        
GSE $35,061
 $9
 $60
 $35,010
CMO 264,607
 566
 3,957
 261,216
FNMA MBS 414,218
 950
 9,404
 405,764
FHLMC MBS 64,709
 135
 1,330
 63,514
GNMA MBS 28,540
 303
 427
 28,416
Other investments 626
 —
 3
 623
  $807,761
 $1,963
 $15,181
 $794,543
 June 30, 2019
(Dollars in thousands) Amortized Cost 
Gross
Unrealized
 Gain
 
Gross
Unrealized
 Loss
 
Fair
Value
 Amortized Cost 
Gross
Unrealized
 Gain
 
Gross
Unrealized
 Loss
 
Fair
Value
Held-to-Maturity Securities(1)
        
September 30, 2017        
Available-for-Sale Debt Securities        
CMO $367,289
 $5,455
 $509
 $372,235
FNMA MBS 1,034,233
 19,091
 929
 1,052,395
FHLMC MBS 330,609
 6,219
 245
 336,583
GNMA MBS 35,471
 378
 192
 35,657
 $1,767,602
 $31,143
 $1,875
 $1,796,870
Held-to-Maturity Debt Securities(1)
        
State and political subdivisions $161,721
 $1,796
 $120
 $163,397
 $141,315
 $2,552
 $6
 $143,861
December 31, 2016        
State and political subdivisions $164,346
 $271
 $1,385
 $163,232
Foreign bonds $2,002
 $4
 $—
 $2,006
 $143,317
 $2,556
 $6
 $145,867
        
        
Equity Investments(2)
        
Visa Class B shares $15,716
 $24,221
 $—
 $39,937
Other equity investments 8,149
 625
 —
 8,774
 $23,865
 $24,846
 $—
 $48,711
(1) 
Held-to–maturity securities transferred from available-for-sale are included in held-to-maturity at fair value at the time of transfer. The amortized cost of held-to-maturity securities included net unrealized gains of $1.8 million and $2.2$0.8 million at SeptemberJune 30, 2017 and December 31, 2016, respectively,2019, related to securities transferred, which are offset in Accumulated Other Comprehensive Income,other comprehensive income, net of tax.
(2)
Equity investments are included in Other investments in the unaudited Consolidated Statements of Financial Condition.

  December 31, 2018
(Dollars in thousands) Amortized Cost Gross
Unrealized
Gain		 Gross
Unrealized
Loss		 Fair
Value
Available-for-Sale Debt Securities        
CMO $376,867
 $1,721
 $6,838
 $371,750
FNMA MBS 655,485
 1,526
 12,938
 644,073
FHLMC MBS 155,758
 558
 2,394
 153,922
GNMA MBS 36,117
 97
 880
 35,334
  $1,224,227
 $3,902
 $23,050
 $1,205,079
Held-to-Maturity Debt Securities(1)
        
State and political subdivisions $149,950
 $275
 $794
 $149,431
         
Equity Investments(2)
        
Visa Class B shares $13,918
 $20,015
 $—
 $33,933
Other equity investments 3,300
 —
 —
 3,300
  $17,218
 $20,015
 $—
 $37,233
(1)
Held-to–maturity securities transferred from available-for-sale are included in held-to-maturity at fair value at the time of transfer. The amortized cost of held-to-maturity securities included net unrealized gains of $1.0 million at December 31, 2018, related to securities transferred, which are offset in Accumulated other comprehensive loss, net of tax.
(2)
Equity investments are included in Other investments in the unaudited Consolidated Statements of Financial Condition.

The scheduled maturities of our available-for-sale debt securities at June 30, 2019 and December 31, 2018 are presented in the table below:
  Available for Sale
  Amortized Fair
(Dollars in thousands) Cost Value
June 30, 2019 (1)
    
Within one year $—
 $—
After one year but within five years 19,457
 19,519
After five years but within ten years 155,351
 156,432
After ten years 1,592,794
 1,620,919
  $1,767,602
 $1,796,870
December 31, 2018 (1)
    
Within one year $—
 $—
After one year but within five years 19,714
 19,423
After five years but within ten years 170,118
 163,731
After ten years 1,034,395
 1,021,925
  $1,224,227
 $1,205,079
(1)
Actual maturities could differ from contractual maturities.








The scheduled maturities of investmentour held-to-maturity debt securities available for sale and held to maturity at SeptemberJune 30, 20172019 and December 31, 20162018 are presented in the table below:
  Held to Maturity
  Amortized Fair
(Dollars in thousands) Cost Value
June 30, 2019 (1)
    
Within one year $2,626
 $2,630
After one year but within five years 7,423
 7,458
After five years but within ten years 30,228
 30,703
After ten years 103,040
 105,076
  $143,317
 $145,867
December 31, 2018 (1)
    
Within one year $1,018
 $1,016
After one year but within five years 6,703
 6,701
After five years but within ten years 29,613
 29,547
After ten years 112,616
 112,167
  $149,950
 $149,431
  
Available for Sale (1)
  Amortized Fair
(Dollars in thousands) Cost Value
September 30, 2017    
Within one year $—
 $—
After one year but within five years 4,007
 4,002
After five years but within ten years 201,919
 198,334
After ten years 609,548
 607,473
  $815,474
 $809,809
December 31, 2016    
Within one year $16,009
 $16,017
After one year but within five years 19,052
 18,992
After five years but within ten years 276,635
 270,300
After ten years 495,439
 488,611
  $807,135
 $793,920
     
  Held to Maturity
  Amortized Fair
(Dollars in thousands) Cost Value
September 30, 2017    
Within one year $328
 $326
After one year but within five years 5,437
 5,491
After five years but within ten years 15,672
 15,838
After ten years 140,284
 141,742
  $161,721
 $163,397
December 31, 2016    
Within one year $—
 $—
After one year but within five years 6,168
 6,162
After five years but within ten years 8,882
 8,870
After ten years 149,296
 148,200
  $164,346
 $163,232

(1) 
Included in the investment portfolio, but not in the table above, is a mutual fund with an amortized cost and fair value of $0.6 million and $0.6 million as of September 30, 2017 and December 31, 2016 which has no stated maturity.Actual maturities could differ from contractual maturities.
Mortgage-backed securities (MBS) may have expected maturities that differ from their contractual maturities. These differences arise because borrowersissuers may have the right to call orsecurities and borrowers may have the right to prepay obligations with or without prepayment penalty.
Investment securities with fair market values aggregating $737.3 million$1.1 billion and $562.5$914.5 million were pledged as collateral for retail customer repurchase agreements, municipal deposits, and other obligations as of SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.
During the ninesix months ended SeptemberJune 30, 2017,2019, we sold $415.5$602.5 million of investmentdebt securities categorized as available for sale, of which $578.8 million was related to the acquisition of Beneficial (see Note 3 for further information about the acquisition). The remaining $23.7 million resulted in realized gains of less than $0.1 million and no realized losses. During the six months ended June 30, 2018, we sold $7.0 million of debt securities categorized as available for sale, resulting in realized gains of $1.9 million and realized losses of less than $0.1 million. During the nine months ended September 30, 2016, we sold $155.8 million of investment securities categorized as available for sale, resulting in realized gains of $1.9 million and no realized losses. The cost basis of all investmentdebt securities sales is based on the specific identification method.
As of SeptemberJune 30, 20172019 and December 31, 2016,2018, our investmentdebt securities portfolio had remaining unamortized premiums of $14.9$15.5 million and $18.0$12.7 million, respectively, and unaccreted discounts of $1.1$3.5 million and $0.4$2.5 million, respectively.


For investmentdebt securities with unrealized losses, the table below shows our gross unrealized losses and fair value by investment category and length of time that individual debt securities were in a continuous unrealized loss position at SeptemberJune 30, 2017.2019.
 Duration of Unrealized Loss Position     Duration of Unrealized Loss Position    
 Less than 12 months 12 months or longer Total Less than 12 months 12 months or longer Total
 Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss Value Loss Value Loss Value Loss
Available-for-sale securities:            
Available-for-sale debt securities:            
CMO $114,939
 $1,188
 $43,775
 $1,166
 $158,714
 $2,354
 $—
 $—
 $59,051
 $509
 $59,051
 $509
FNMA MBS 188,153
 2,299
 74,801
 2,924
 262,954
 5,223
 31,377
 43
 105,513
 886
 136,890
 929
FHLMC MBS 45,317
 497
 7,892
 282
 53,209
 779
 18,188
 89
 18,581
 156
 36,769
 245
GNMA MBS 4,856
 83
 10,687
 232
 15,543
 315
 —
 —
 14,452
 192
 14,452
 192
Other investments —
 —
 624
 16
 624
 16
Total temporarily impaired investments $353,265
 $4,067
 $137,779
 $4,620
 $491,044
 $8,687
 $49,565
 $132
 $197,597
 $1,743
 $247,162
 $1,875
                        
 Less than 12 months 12 months or longer Total
 Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Held-to-maturity securities:            
Held-to-maturity debt securities:            
State and political subdivisions $13,571
 $48
 $6,700
 $72
 $20,271
 $120
 $—
 $—
 $4,105
 $6
 $4,105
 $6
Total temporarily impaired investments $13,571
 $48
 $6,700
 $72
 $20,271
 $120
 $—
 $—
 $4,105
 $6
 $4,105
 $6
            
For investmentdebt securities with unrealized losses, the table below shows our gross unrealized losses and fair value by investment category and length of time that individual debt securities were in a continuous unrealized loss position at December 31, 2016.
2018.
  Duration of Unrealized Loss Position    
  Less than 12 months 12 months or longer Total
  Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Available-for-sale debt securities:            
CMO $17,143
 $40
 $212,208
 $6,798
 $229,351
 $6,838
FNMA MBS 34,214
 162
 407,638
 12,776
 441,852
 12,938
FHLMC MBS 16,025
 21
 76,469
 2,373
 92,494
 2,394
GNMA MBS 5,837
 79
 21,805
 801
 27,642
 880
Total temporarily impaired investments $73,219
 $302
 $718,120
 $22,748
 $791,339
 $23,050
             
Held-to-maturity debt securities:            
State and political subdivisions $91,228
 $155
 $58,203
 $639
 $149,431
 $794
  Duration of Unrealized Loss Position    
  Less than 12 months 12 months or longer Total
  Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Available-for-sale securities:            
GSE $21,996
 $60
 $—
 $—
 $21,996
 $60
CMO 160,572
 3,867
 4,654
 90
 165,226
 3,957
FNMA MBS 50,878
 1,330
 —
 —
 50,878
 1,330
FHLMC MBS 300,403
 9,404
 —
 —
 300,403
 9,404
GNMA MBS 16,480
 427
 —
 —
 16,480
 427
Other investments 623
 3
 —
 —
 623
 3
Total temporarily impaired investments $550,952
 $15,091
 $4,654
 $90
 $555,606
 $15,181
             
  Less than 12 months 12 months or longer Total
  Fair Unrealized Fair Unrealized Fair Unrealized
(Dollars in thousands) Value Loss Value Loss Value Loss
Held-to-maturity securities:            
State and political subdivisions $112,642
 $1,374
 $695
 $11
 $113,337
 $1,385
Total temporarily impaired investments $112,642
 $1,374
 $695
 $11
 $113,337
 $1,385


At SeptemberJune 30, 2017,2019, we owned investmentdebt securities totaling $511.3$251.3 million for which the amortized cost basis exceeded fair value. Total unrealized losses on these securities were $8.8$1.9 million at SeptemberJune 30, 2017.2019. The temporary impairment is the result of changes in market interest rates subsequent to the purchase of the securities.purchase. Our investment portfolio is reviewed each quarter for indications of OTTI. This review includes analyzing the length of time and the extent to which the fair value has been lower than the amortized cost, the financial condition and near-term prospects of the issuer, including any specific events which may influence the operations of the issuer and our intent and ability to hold the investment for a period of time sufficient to allow for full recovery of the unrealized loss. We evaluate our intent and ability to hold debt securities based upon our investment strategy for the particular type of security and our cash flow needs, liquidity position, capital adequacy and interest rate risk position. We do not have the intent to sell, nor is it more likely-than-not we will be required to sell these securities before we are able to recover the amortized cost basis.
All debt securities, with the exception of one having a fair value of $0.8$0.6 million at SeptemberJune 30, 2017,2019, were AA-rated or better at the time of purchase and remained investment grade at SeptemberJune 30, 2017.2019. All securities were evaluated for OTTI at SeptemberJune 30, 20172019 and December 31, 2016.2018. The result of this evaluation showed no OTTI as of SeptemberJune 30, 20172019 or December 31, 2016.2018. The estimated weighted average duration of MBS was 5.103.3 years at SeptemberJune 30, 2017.
2019.


















5.7. LOANS
The following table shows our loan and lease portfolio by category:
(Dollars in thousands) September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
Commercial and industrial $1,388,094
 $1,287,731
 $2,184,487
 $1,472,489
Owner-occupied commercial 1,096,753
 1,078,162
 1,280,894
 1,059,974
Commercial mortgages 1,157,074
 1,163,554
 2,246,047
 1,162,739
Construction 293,317
 222,712
 541,696
 316,566
Commercial small business leases 156,037
 —
Residential (1)
 262,147
 289,611
 1,081,734
 218,099
Consumer 520,276
 450,029
 1,126,733
 680,939
 4,717,661
 4,491,799
 8,617,628
 4,910,806
Less:     
  
Deferred fees, net 7,244
 7,673
 4,555
 7,348
Allowance for loan losses 40,201
 39,751
Net loans $4,670,216
 $4,444,375
Allowance for loan and lease losses 45,364
 39,539
Net loans and leases $8,567,709
 $4,863,919
(1)Includes reverse mortgages at fair value of $21.4$15.9 million at SeptemberJune 30, 20172019 and $22.6$16.5 million at December 31, 2016.2018.


Upon the closing of the Beneficial acquisition on March 1, 2019, we acquired $37.0 million of credit impaired loans. The following table details the loans acquired from Beneficial that are accounted for in accordance with ASC 310-30, as of the date of the acquisition.
(Dollars in thousands) March 1, 2019
Contractual required principal and interest at acquisition $53,647
Contractual cash flows not expected to be collected (nonaccretable difference) 20,118
Expected cash flows at acquisition 33,529
Interest component of expected cash flows (accretable yield) 3,068
Fair value of acquired loans accounted for under ASC 310-30 30,461

The following table shows the outstanding principal balance and carrying amounts for acquired credit impaired loans for which the Company applies ASC 310-30 as of the dates indicated:
(Dollars in thousands) June 30, 2019 December 31, 2018
Outstanding principal balance $48,124
 $18,642
Carrying amount 33,752
 14,718
Allowance for loan losses 179
 227
(Dollars in thousands) September 30, 2017 December 31, 2016
Outstanding principal balance $30,465
 $41,574
Carrying amount 24,039
 33,104
Allowance for loan losses 542
 510


The following table presents the changes in accretable yield on the acquired credit impaired loans for the ninethree and six months ended SeptemberJune 30, 2017:2019 and 2018.
  Three Months Ended June 30, Six Months Ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Balance at beginning of period $4,955
 $2,440
 $2,463
 $3,035
Addition from Beneficial —
 —
 3,068
 —
Accretion (662) (501) (1,074) (918)
Reclassification from nonaccretable difference 207
 1,076
 207
 1,078
Additions/adjustments (445) (90) (609) (270)
Balance at end of period $4,055
 $2,925
 $4,055
 $2,925
(Dollars in thousands) Nine months ended September 30, 2017
Balance at beginning of period $5,150
Accretion (2,158)
Reclassification from nonaccretable difference 1,246
Additions/adjustments (1,089)
Disposals (345)
Balance at end of period $2,804


6.8. ALLOWANCE FOR LOAN AND LEASE LOSSES AND CREDIT QUALITY INFORMATION
Allowance for Loan Losses
We maintain an allowance for loan losses which represents our best estimate of probable losses withinin our loan portfolio. As losses are realized, they are charged to this allowance. We established our allowance in accordance with guidance provided in the SEC’s Staff Accounting Bulletin 102 (SAB 102), Selected Loan Loss Allowance Methodology and Documentation Issues, ASC 450, Contingencies and ASC 310, Receivables. When we have reason to believe it is probable that we will not be able to collect all contractually due amounts of principal and interest, loans are evaluated for impairment on an individual basis and a specific allocation of the allowance is assigned in accordance with ASC 310-10. We also maintain an allowance for loan losses on acquired loans when: (i) for loans accounted for under ASC 310-30, there is deterioration in credit quality subsequent to acquisition and (ii) for loans accounted for under ASC 310-20, the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition. The determination of the allowance for loan losses requires significant judgment reflecting our best estimate of impairment related to specifically identified impaired loans as well as probable loan losses in the remaining loan portfolio. Our evaluation is based on a continuing review of these portfolios. The following are included in our allowance for loan losses:
 
Specific reserves for impaired loans
An allowance for each pool of homogenoushomogeneous loans based on historical loss experience
Adjustments for qualitative and environmental factors allocated to pools of homogenoushomogeneous loans
When it is probable that the Bank will be unable to collect all amounts due (interest and principal) in accordance with the contractual terms of the loan agreement, it assigns a specific reserve to that loan, ifas necessary. Unless loans are well-secured and collection is imminent, loans greater than 90 days past due are deemed impaired and their respective reserves are generally charged-offcharged off once the loss has been confirmed. Estimated specific reserves are based on collateral values, estimates of future cash flows or market valuations. We charge loans off when they are deemed to be uncollectible. During the ninesix months ended SeptemberJune 30, 20172019 and 2016,2018, net charge-offs totaled $6.5$14.0 million, or 0.19%0.38%, of average loans annualized, and $5.9$5.7 million, or 0.20%0.24%, of average loans annualized, respectively.
Allowances for pooled homogeneous loans, that are not deemed impaired, are based on historical net loss experience. Estimated losses for pooled portfolios are determined differently for commercial loan pools and retail loan pools. Commercial loans are pooled as follows: commercial, owner-occupied commercial, commercial mortgages and construction. Each pool is further segmented by internally assessed risk ratings. Loan losses for commercial loans are estimated by determining the probability of default and expected loss severity upon default. The probability of default is calculated based on the historical rate of migration to impaired status during the last 2734 quarters. During the ninesix months ended SeptemberJune 30, 2017,2019, we increased the look-back period to 2734 quarters from the 2432 quarters used at December 31, 2016.2018. This increase in the look-back period allows us to continue to anchor to the fourth quarter of 2010 to ensure that the corequantitative reserves calculated by the ALLLallowance for loan loss model are adequately considering the losses within a full credit cycle.
Loss severity upon default is calculated as the actual loan losses (net of recoveries) on impaired loans in their respective pool during the same time frame. Retail loans are pooled into the following segments: residential mortgage, consumer secured and consumer unsecured loans. Pooled reserves for retail loans are calculated based solely on average net loss rates over the same 2734 quarter look-back period.
Qualitative adjustment factors consider various current internal and external conditions which are allocated among loan types and take into consideration:
 
Current underwriting policies, staff, and portfolio mix,
Internal trends of delinquency, nonaccrual and criticized loans by segment,
Risk rating accuracy, control and regulatory assessments/environment,
General economic conditions - locally and nationally,
Market trends impacting collateral values, and
The competitive environment, as it could impact loan structure and underwriting.
The above factors are based on their relative standing compared to the period in which historic losses are used in corequantitative reserve estimates and current directional trends. Qualitative factors in our model can add to or subtract from corequantitative reserves.
The allowance methodology uses a loss emergence period (LEP), which is the period of time between an event that triggers the probability of a loss and the confirmation of the loss. We estimate the commercial LEP to be approximately 9nine quarters as of SeptemberJune 30, 2017.2019. Our residential mortgage and consumer LEP remainedestimate remains at 4four quarters as of SeptemberJune 30, 2017.2019. We evaluate LEP quarterly for reasonableness and complete a detailed historical analysis of our LEP annually for our commercial portfolio and review the current 4four quarter LEP for the retail portfolio to determine the continued reasonableness of this assumption.

In prior periods, we had a component of the allowance for model estimation and complexity risk reserve. During the second quarter of 2016 as a result of continued refinement of the model and normal review of the factors, we removed the model estimation and complexity risk reserve from our calculation of the allowance for loan losses.
Our loan officers and risk managers meet at least quarterly to discuss and review the conditions and risks associated with individual problem loans. In addition, various regulatory agencies periodically review our loan ratings and allowance for loan losses and the Bank’s internal loan review department performs loan reviews.
The following tables provide the activity of our allowance for loan losses and loan balances for the three and ninesix months ended SeptemberJune 30, 2017:2019:
(Dollars in thousands) Commercial 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Residential(1)
 Consumer Total 
Commercial and Industrial(1)
 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Residential(2)
 Consumer Total
Three months ended September 30, 2017
Three months ended June 30, 2019              
Allowance for loan losses                            
Beginning balance $14,224
 $5,816
 $7,335
 $3,432
 $2,050
 $7,148
 $40,005
 $21,016
 $4,949
 $6,679
 $4,044
 $1,401
 $8,232
 $46,321
Charge-offs (1,603) (104) (1,196) (215) (59) (575) (3,752) (13,002) (8) (153) (42) (163) (960) (14,328)
Recoveries 417
 12
 16
 301
 11
 295
 1,052
 203
 78
 398
 1
 (2) 498
 1,176
Provision (credit) 2,128
 (96) (231) 427
 (49) 644
 2,823
 13,568
 (526) (474) (1,013) 24
 72
 11,651
Provision for acquired loans (7) 104
 (5) (28) 9
 —
 73
Provision (credit) for acquired loans 219
 (13) 94
 (6) 98
 152
 544
Ending balance $15,159
 $5,732
 $5,919
 $3,917
 $1,962
 $7,512
 $40,201
 $22,004
 $4,480
 $6,544
 $2,984
 $1,358
 $7,994
 $45,364
Nine months ended September 30, 2017
Six months ended June 30, 2019              
Allowance for loan losses                            
Beginning balance $13,339
 $6,588
 $8,915
 $2,838
 $2,059
 $6,012
 $39,751
 $14,211
 $5,057
 $6,806
 $3,712
 $1,428
 $8,325
 $39,539
Charge-offs (3,787) (296) (1,702) (346) (112) (2,606) (8,849) (13,744) (8) (155) (42) (285) (1,644) (15,878)
Recoveries 820
 120
 69
 305
 141
 943
 2,398
 561
 81
 427
 2
 (16) 799
 1,854
Provision (credit) 4,597
 (802) (1,602) 1,056
 (146) 3,177
 6,280
 20,691
 (637) (630) (682) 75
 329
 19,146
Provision for acquired loans 190
 122
 239
 64
 20
 (14) 621
Provision (credit) for acquired loans 285
 (13) 96
 (6) 156
 185
 703
Ending balance $15,159
 $5,732
 $5,919
 $3,917
 $1,962
 $7,512
 $40,201
 $22,004
 $4,480
 $6,544
 $2,984
 $1,358
 $7,994
 $45,364
Period-end allowance allocated to:Period-end allowance allocated to:              
Loans individually evaluated for impairment $1,220
 $—
 $131
 $—
 $858
 $198
 $2,407
 $4,324
 $—
 $—
 $—
 $488
 $183
 $4,995
Loans collectively evaluated for impairment 13,646
 5,699
 5,638
 3,881
 1,078
 7,310
 37,252
 17,679
 4,401
 6,496
 2,976
 828
 7,810
 40,190
Acquired loans evaluated for impairment 293
 33
 150
 36
 26
 4
 542
 1
 79
 48
 8
 42
 1
 179
Ending balance $15,159
 $5,732
 $5,919
 $3,917
 $1,962
 $7,512
 $40,201
 $22,004
 $4,480
 $6,544
 $2,984
 $1,358
 $7,994
 $45,364
Period-end loan balances evaluated for:
Period-end loan balances:              
Loans individually evaluated for impairment (2)(3)
 $12,845
 $3,346
 $9,012
 $1,839
 $14,060
 $7,409
 $48,511
 $21,171
 $8,753
 $2,431
 $—
 $11,398
 $7,383
 $51,136
Loans collectively evaluated for impairment 1,249,027
 941,296
 943,699
 271,447
 148,715
 472,488
 4,026,672
 1,575,810
 1,168,864
 765,268
 324,307
 134,235
 848,396
 4,816,880
Acquired nonimpaired loans 120,987
 144,710
 194,394
 19,085
 77,154
 40,136
 596,466
 738,579
 99,326
 1,464,739
 216,843
 912,288
 267,955
 3,699,730
Acquired impaired loans 5,235
 7,401
 9,969
 946
 788
 243
 24,582
 4,964
 3,951
 13,609
 546
 7,863
 2,999
 33,932
Ending balance (3)(4)
 $1,388,094
 $1,096,753
 $1,157,074
 $293,317
 $240,717
 $520,276
 $4,696,231
 $2,340,524
 $1,280,894
 $2,246,047
 $541,696
 $1,065,784
 $1,126,733
 $8,601,678
(1) 
Includes commercial small business leases.
(2)
Period-end loan balance excludes reverse mortgages at fair value of $21.4$15.9 million.
(2)
The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans of $14.9 million for the period ending September 30, 2017. Accruing troubled debt restructured loans are considered impaired loans.
(3) 
Ending loan balances do not include net deferred fees.





The following table provides the activity of the allowance for loan losses and loan balances for the three and nine months ended September 30, 2016:
(Dollars in thousands) Commercial 
Owner -
occupied
Commercial
 
Commercial
Mortgages
 Construction 
Residential(1)
 Consumer 
Complexity Risk(2)
 Total
Three months ended September 30, 2016
Allowance for loan losses                
Beginning balance $11,402
 $6,723
 $8,135
 $3,308
 $2,352
 $5,826
 $—
 $37,746
Charge-offs (3,737) (1,415) (1) (30) (43) (518) —
 (5,744)
Recoveries 223
 15
 197
 440
 33
 290
 —
 1,198
Provision (credit) 3,714
 1,437
 1,089
 (824) (179) 401
 —
 5,638
Provision for acquired loans 117
 185
 (48) (76) 12
 —
 —
 190
Ending balance $11,719
 $6,945
 $9,372
 $2,818
 $2,175
 $5,999
 $—
 $39,028
Nine months ended September 30, 2016
Allowance for loan losses                
Beginning balance $11,156
 $6,670
 $6,487
 $3,521
 $2,281
 $5,964
 $1,010
 $37,089
Charge-offs (4,643) (1,556) (79) (59) (72) (1,967) —
 (8,376)
Recoveries 557
 66
 310
 486
 112
 922
 —
 2,453
Provision (credit) 4,551
 1,564
 2,650
 (1,104) (177) 1,118
 (1,010) 7,592
Provision for acquired loans 98
 201
 4
 (26) 31
 (38) —
 270
Ending balance $11,719
 $6,945
 $9,372
 $2,818
 $2,175
 $5,999
 $—
 $39,028
Period-end allowance allocated to:
Loans individually evaluated for impairment $692
 $—
 $1,264
 $215
 $989
 $201
 $—
 $3,361
Loans collectively evaluated for impairment 10,974
 6,923
 7,982
 2,549
 1,167
 5,798
 —
 35,393
Acquired loans evaluated for impairment 53
 22
 126
 54
 19
 —
 —
 274
Ending balance $11,719
 $6,945
 $9,372
 $2,818
 $2,175
 $5,999
 $—
 $39,028
Period-end loan balances:
Loans individually evaluated for impairment (3)
 $4,198
 $2,510
 $7,165
 $1,419
 $13,957
 $8,105
 $—
 $37,354
Loans collectively evaluated for impairment 1,077,258
 869,051
 904,328
 182,338
 150,318
 368,428
 —
 3,551,721
Acquired nonimpaired loans 175,570
 175,411
 229,530
 21,627
 103,537
 61,257
 —
 766,932
Acquired impaired loans 9,691
 10,673
 12,880
 3,592
 899
 368
 —
 38,103
Ending balance (4)
 $1,266,717
 $1,057,645
 $1,153,903
 $208,976
 $268,711
 $438,158
 $—
 $4,394,110
(1)
Period-end loan balance excludes reverse mortgages, at fair value of $23.1 million.
(2)
Represents the portion of the allowance for loan losses established to capture factors not already included in other components in our allowance for loan losses methodology.
(3)
The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans of $14.2 million for the period ending SeptemberJune 30, 2016.2019. Accruing troubled debt restructured loans are considered impaired loans.
(4) 
Ending loan balances do not include net deferred fees.







The following table provides the activity of the allowance for loan losses and loan balances for the three and six months ended June 30, 2018:

(Dollars in thousands) Commercial and Industrial 
Owner -
occupied
Commercial
 
Commercial
Mortgages
 Construction 
Residential(1)
 Consumer Total
Three months ended June 30, 2018              
Allowance for loan losses              
Beginning balance $16,102
 $5,359
 $6,617
 $2,864
 $1,680
 $8,188
 $40,810
Charge-offs (1,740) (341) —
 —
 (54) (828) (2,963)
Recoveries 359
 7
 3
 1
 75
 247
 692
Provision (credit) 1,133
 204
 337
 422
 (182) 537
 2,451
Provision for acquired loans (12) 55
 (6) 2
 —
 8
 47
Ending balance $15,842
 $5,284
 $6,951
 $3,289
 $1,519
 $8,152
 $41,037
Six months ended June 30, 2018              
Allowance for loan losses              
Beginning balance $16,732
 $5,422
 $5,891
 $2,861
 $1,798
 $7,895
 $40,599
Charge-offs (5,100) (351) (48) —
 (54) (1,291) (6,844)
Recoveries 439
 12
 137
 1
 91
 454
 1,134
Provision (credit) 3,783
 146
 954
 450
 (313) 1,086
 6,106
Provision for acquired loans (12) 55
 17
 (23) (3) 8
 42
Ending balance $15,842
 $5,284
 $6,951
 $3,289
 $1,519
 $8,152
 $41,037
Period-end allowance allocated to:              
Loans individually evaluated for impairment $2,208
 $—
 $63
 $593
 $592
 $175
 $3,631
Loans collectively evaluated for impairment 13,472
 5,266
 6,804
 2,687
 891
 7,960
 37,080
Acquired loans evaluated for impairment 162
 18
 84
 9
 36
 17
 326
Ending balance $15,842
 $5,284
 $6,951
 $3,289
 $1,519
 $8,152
 $41,037
Period-end loan balances:              
Loans individually evaluated for impairment(2)
 $17,015
 $3,224
 $6,737
 $5,557
 $12,282
 $7,714
 $52,529
Loans collectively evaluated for impairment 1,404,662
 952,627
 972,684
 283,480
 134,323
 581,536
 4,329,312
Acquired nonimpaired loans 101,532
 125,129
 172,082
 7,352
 65,723
 29,239
 501,057
Acquired impaired loans 2,904
 4,915
 9,151
 731
 771
 251
 18,723
Ending balance(3)
 $1,526,113
 $1,085,895
 $1,160,654
 $297,120
 $213,099
 $618,740
 $4,901,621









(1)
Period-end loan balance excludes reverse mortgages at fair value of $16.1 million.
(2)
The difference between this amount and nonaccruing loans represents accruing troubled debt restructured loans of $16.3 million for the period ending June 30, 2018. Accruing troubled debt restructured loans are considered impaired loans.
(3)
Ending loan balances do not include net deferred fees.
Nonaccrual and Past Due Loans

Nonaccruing loans are those on which the accrual of interest has ceased. Typically, we discontinue accrual of interest on originated loans after payments become more than 90 days past due or earlier if we do not expect the full collection of principal or interest in accordance with the terms of the loan agreement. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the accretion of net deferred loan fees and amortization of net deferred loan costs is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on our assessment of the ultimate collectability of principal and interest. Loans greater than 90 days past due and still accruing are defined as loans contractually past due 90 days or more as to principal or interest payments, but which remain in accrual status because they are considered well secured and are in the process of collection.

The following tables show our nonaccrual and past due loans at the dates indicated:


  June 30, 2019
(Dollars in thousands) 
30–59 Days
Past Due 
and
Still 
Accruing
 
60–89 Days
Past Due and
Still 
Accruing
 
Greater 
Than
90 Days
Past Due and
Still Accruing
 
Total Past
Due
And Still
Accruing
 
Accruing
Current
Balances
 
Acquired
Impaired
Loans
 
Nonaccrual
Loans
 
Total
Loans
Commercial and industrial(1)
 $3,894
 $682
 $—
 $4,576
 $2,309,943
 $4,964
 $21,041
 $2,340,524
Owner-occupied commercial 4,105
 398
 1,165
 5,668
 1,262,522
 3,951
 8,753
 1,280,894
Commercial mortgages 4,499
 201
 —
 4,700
 2,225,436
 13,609
 2,302
 2,246,047
Construction 249
 —
 —
 249
 540,901
 546
 —
 541,696
Residential(2)
 6,022
 6
 115
 6,143
 1,047,891
 7,863
 3,887
 1,065,784
Consumer(3)
 6,693
 3,811
 14,387
 24,891
 1,097,190
 2,999
 1,653
 1,126,733
Total(4)
 $25,462
 $5,098
 $15,667
 $46,227
 $8,483,883
 $33,932
 $37,636
 $8,601,678
% of Total Loans 0.30% 0.06% 0.18% 0.54% 98.63% 0.39% 0.44% 100%
  September 30, 2017
(Dollars in thousands) 
30–59 Days
Past Due 
and
Still 
Accruing
 
60–89 Days
Past Due and
Still 
Accruing
 
Greater 
Than
90 Days
Past Due and
Still Accruing
 
Total Past
Due
And Still
Accruing
 
Accruing
Current
Balances
 
Acquired
Impaired
Loans
 
Nonaccrual
Loans
 
Total
Loans
Commercial $673
 $136
 $685
 $1,494
 $1,368,660
 $5,235
 $12,705
 $1,388,094
Owner-occupied commercial 998
 —
 —
 998
 1,085,008
 7,401
 3,346
 1,096,753
Commercial mortgages 1,320
 —
 —
 1,320
 1,136,982
 9,969
 8,803
 1,157,074
Construction 1,033
 —
 —
 1,033
 289,499
 946
 1,839
 293,317
Residential(1)
 1,708
 364
 557
 2,629
 232,567
 788
 4,733
 240,717
Consumer 593
 771
 96
 1,460
 516,463
 243
 2,110
 520,276
Total (2)
 $6,325
 $1,271
 $1,338
 $8,934
 $4,629,179
 $24,582
 $33,536
 $4,696,231
% of Total Loans 0.13% 0.03% 0.03% 0.19% 98.58% 0.52% 0.71% 100%
(1) 
Includes commercial small business leases.
(2)
Residential accruing current balances excludes reverse mortgages at fair value of $21.4$15.9 million.
(2)(3) 
Includes $22.3 million of delinquent, but still accruing, U.S. government-guaranteed student loans that carry little risk of credit loss.
(4)
The balances above include a total of $596.5 million of$3.7 billion acquired nonimpairednon-impaired loans.
 December 31, 2016 December 31, 2018
(Dollars in thousands) 
30–59 Days
Past Due 
and
Still 
Accruing
 
60–89 Days
Past Due 
and
Still 
Accruing
 
Greater 
Than
90 Days Past
Due and Still
Accruing
 
Total Past
Due And
Still
Accruing
 
Accruing
Current
Balances
 
Acquired
Impaired
Loans
 
Nonaccrual
Loans
 
Total
Loans
 
30–59 Days
Past Due 
and
Still 
Accruing
 
60–89 Days
Past Due 
and
Still 
Accruing
 Greater 
Than
90 Days
Past Due and
Still Accruing		 Total Past
Due
And Still
Accruing		 
Accruing
Current
Balances
 
Acquired
Impaired
Loans
 
Nonaccrual
Loans
 
Total
Loans
Commercial $1,507
 $278
 $—
 $1,785
 $1,277,748
 $6,183
 $2,015
 $1,287,731
Commercial and industrial $3,653
 $993
 $71
 $4,717
 $1,452,185
 $1,531
 $14,056
 $1,472,489
Owner-occupied commercial 116
 540
 —
 656
 1,063,306
 12,122
 2,078
 1,078,162
 733
 865
 —
 1,598
 1,049,722
 4,248
 4,406
 1,059,974
Commercial mortgages 167
 —
 —
 167
 1,143,180
 10,386
 9,821
 1,163,554
 1,388
 908
 —
 2,296
 1,148,988
 7,504
 3,951
 1,162,739
Construction 132
 —
 —
 132
 218,886
 3,694
 —
 222,712
 157
 —
 —
 157
 312,879
 749
 2,781
 316,566
Residential(1)
 3,176
 638
 153
 3,967
 257,234
 860
 4,967
 267,028
 1,970
 345
 660
 2,975
 194,960
 761
 2,854
 201,550
Consumer 392
 346
 285
 1,023
 444,642
 369
 3,995
 450,029
 525
 971
 104
 1,600
 677,182
 151
 2,006
 680,939
Total(2)
 $5,490
 $1,802
 $438
 $7,730
 $4,404,996
 $33,614
 $22,876
 $4,469,216
 $8,426
 $4,082
 $835
 $13,343
 $4,835,916
 $14,944
 $30,054
 $4,894,257
% of Total Loans 0.12% 0.04% 0.01% 0.17% 98.57% 0.75% 0.51% 100% 0.17% 0.08% 0.02% 0.27% 98.81% 0.31% 0.61% 100%
(1) 
Residential accruing current balances excludes reverse mortgages, at fair value of $22.6$16.5 million.
(2) 
The balances above include a total of $724.1$430.0 million of acquired nonimpairednon-impaired loans.










Impaired Loans

Loans for which it is probable we will not collect all principal and interest due according to their contractual terms, which is assessed based on the credit characteristics of the loan and/or payment status, are measured for impairment in accordance with the provisions of SAB 102 and FASB ASC 310, Receivables (ASC 310).310. The amount of impairment is required to be measured using one of three methods: (1) the present value of expected future cash flows discounted at the loan’s effective interest rate; (2) the fair value of collateral, if the loan is collateral dependent or (3) the loan’s observable market price. If the measure of the impaired loan is less than the recorded investment in the loan, a related allowance is allocated for the impairment.

The following tables provide an analysis of our impaired loans at SeptemberJune 30, 20172019 and December 31, 2016:2018:
 
 September 30, 2017 June 30, 2019
(Dollars in thousands) 
Ending
Loan
Balances
 
Loans with
No Related
Reserve (1)
 
Loans with
Related
Reserve
 Related Reserve 
Contractual
Principal Balances
 Average Loan Balances 
Ending
Loan
Balances
 
Loans with
No Related
Reserve(1)
 
Loans with
Related
Reserve(2)
 Related Reserve 
Contractual
Principal Balances(2)
 Average Loan Balances
Commercial $14,814
 $3,129
 $11,685
 $1,513
 $16,967
 $11,981
Commercial and industrial $21,173
 $8,227
 $12,946
 $4,324
 $25,425
 $18,055
Owner-occupied commercial 4,669
 3,346
 1,323
 33
 4,984
 5,583
 10,134
 8,753
 1,381
 79
 10,430
 6,522
Commercial mortgages 12,190
 7,267
 4,923
 281
 18,385
 12,941
 3,755
 2,431
 1,324
 48
 8,047
 6,300
Construction 2,111
 1,839
 272
 36
 2,377
 3,769
 546
 —
 546
 8
 638
 3,285
Residential 14,621
 8,343
 6,278
 884
 17,517
 14,652
 11,610
 7,733
 3,877
 530
 13,722
 11,602
Consumer 7,447
 5,914
 1,533
 202
 9,283
 8,216
 7,414
 6,009
 1,405
 185
 8,161
 7,932
Total (2) $55,852
 $29,838
 $26,014
 $2,949
 $69,513
 $57,142
 $54,632
 $33,153
 $21,479
 $5,174
 $66,423
 $53,696
(1) 
Reflects loan balances at or written down to their remaining book balance.
(2) 
The above includes acquired impaired loans totaling $7.3$3.5 million in the ending loan balance and $8.3$3.8 million in the contractual principal balance of the total acquired impaired loan portfolio of $24.6 million
balance.
 December 31, 2016 December 31, 2018
(Dollars in thousands) 
Ending
Loan
Balances
 
Loans with
No Related
Reserve (1)
 
Loans with
Related
Reserve
 
Related
Reserve
 
Contractual
Principal
Balances
 
Average
Loan
Balances
 
Ending
Loan
Balances
 
Loans with
No Related
Reserve(1)
 
Loans with
Related
Reserve(2)
 
Related
Reserve
 
Contractual
Principal
Balances(2)
 
Average
Loan
Balances
Commercial $4,250
 $1,395
 $2,855
 $505
 $5,572
 $5,053
Commercial and industrial $14,841
 $8,625
 $6,216
 $878
 $22,365
 $18,484
Owner-occupied commercial 4,650
 2,078
 2,572
 15
 5,129
 3,339
 6,065
 4,406
 1,659
 92
 6,337
 5,378
Commercial mortgages 15,065
 4,348
 10,717
 1,433
 20,716
 7,323
 5,679
 4,083
 1,596
 79
 15,372
 7,438
Construction 3,662
 —
 3,662
 303
 3,972
 2,376
 3,530
 —
 3,530
 458
 5,082
 5,091
Residential 14,256
 7,122
 7,134
 934
 17,298
 15,083
 11,321
 6,442
 4,879
 581
 13,771
 12,589
Consumer 8,021
 6,561
 1,460
 215
 11,978
 7,910
 7,916
 6,899
 1,017
 170
 8,573
 7,956
Total (2)
 $49,904
 $21,504
 $28,400
 $3,405
 $64,665
 $41,084
 $49,352
 $30,455
 $18,897
 $2,258
 $71,500
 $56,936
(1) 
Reflects loan balances at or written down to their remaining book balance.
(2) 
The above includes acquired impaired loans totaling $12.8$4.3 million in the ending loan balance and $15.0$4.8 million in the contractual principal balance of the total acquired impaired loan portfolio of $33.6 million.balance.
Interest income of $0.3$0.4 million and $1.0$0.6 million was recognized on impaired loans during the three and ninesix months ended SeptemberJune 30, 2017,2019, respectively. Interest income of $0.5$0.4 million and $0.8$0.7 million was recognized on impaired loans during the three and ninesix months ended SeptemberJune 30, 2016,2018, respectively.
As of SeptemberJune 30, 2017,2019, there were 3219 residential loans and 314 commercial loans in the process of foreclosure. The total outstanding balance on these loans was $2.0 million and $5.2 million, respectively. As of December 31, 2018, there were 26 residential loans and 11 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $3.3$1.9 million and $0.2$5.3 million, respectively. As of December 31, 2016, there were 29 residential loans and 7 commercial loans in the process of foreclosure. The total outstanding balance on the loans was $3.7 million and $3.6 million, respectively.

Reserves on Acquired Nonimpaired Loans
In accordance with FASB ASC 310, loans acquired by the Bank through its mergers with First National Bank of Wyoming, Alliance Bankcorp,Bancorp, Inc. (Alliance) and, Penn Liberty Bank (Penn Liberty) and Beneficial are required to be reflected on the balance sheet at their fair values on the date of acquisition as opposed to their contractual values. Therefore, on the date of acquisition establishing an allowance for acquired loans is prohibited. After the acquisition date, the Bank performs a separate allowance analysis on a quarterly basis to determine if an allowance for loan loss is necessary. Should the credit risk calculated exceed the purchased loan portfolio’s remaining credit mark, additional reserves will be added to the Bank’s allowance. When a purchased loan becomes impaired after its acquisition, it is evaluated as part of the Bank’s reserve analysis and a specific reserve is established to be included in the Bank’s allowance.

Credit Quality Indicators
Below is a description of each of our risk ratings for all commercial loans:
 
Pass. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible
Special Mention. Borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.
Substandard. Borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful. Borrowers have well-defined weaknesses inherent in the Substandard category with the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. A doubtful asset has some pending event that may strengthen the asset that defers the loss classification. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.
Loss. Borrowers are uncollectible or of such negligible value that continuance as a bankable asset is not supportable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical to defer writing off this asset even though partial recovery may be recognized sometime in the future.
•
Pass. These borrowers currently show no indication of deterioration or potential problems and their loans are considered fully collectible.
•
Special Mention. Borrowers have potential weaknesses that deserve management’s close attention. Borrowers in this category may be experiencing adverse operating trends, for example, declining revenues or margins, high leverage, tight liquidity, or increasing inventory without increasing sales. These adverse trends can have a potential negative effect on the borrower’s repayment capacity. These assets are not adversely classified and do not expose the Bank to significant risk that would warrant a more severe rating. Borrowers in this category may also be experiencing significant management problems, pending litigation, or other structural credit weaknesses.
•
Substandard. Borrowers have well-defined weaknesses that require extensive oversight by management. Borrowers in this category may exhibit one or more of the following: inadequate debt service coverage, unprofitable operations, insufficient liquidity, high leverage, and weak or inadequate capitalization. Relationships in this category are not adequately protected by the sound financial worth and paying capacity of the obligor or the collateral pledged on the loan, if any. A distinct possibility exists that the Bank will sustain some loss if the deficiencies are not corrected.
•
Doubtful. Borrowers have well-defined weaknesses inherent in the Substandard category with the added characteristic that the possibility of loss is extremely high. Current circumstances in the credit relationship make collection or liquidation in full highly questionable. A doubtful asset has some pending event that may strengthen the asset that defers the loss classification. Such impending events include: perfecting liens on additional collateral, obtaining collateral valuations, an acquisition or liquidation preceding, proposed merger, or refinancing plan.
•
Loss. Loans are uncollectible or of such negligible value that continuance as a bankable asset is not supportable. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical to defer writing off this asset even though partial recovery may be recognized sometime in the future.
Residential and Consumer Loans
The residential and consumer loan portfolios are monitored on an ongoing basis using delinquency information and loan type as credit quality indicators. These credit quality indicators are assessed in the aggregate in these relatively homogeneous portfolios. Loans that are greater than 90 days past due are generally considered nonperforming and placed on nonaccrual status.


The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the Allowance for Loan Loss.















Commercial Credit Exposure
 June 30, 2019
 September 30, 2017 
Commercial and Industrial(1)
 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Total
Commercial(2)
(Dollars in thousands) Commercial 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Total
Commercial(1)
         Amount %
         Amount %
Risk Rating:                        
Special mention $12,474
 $2,858
 $—
 $3,644
 $18,976
   $4,000
 $10,817
 $7,352
 $—
 $22,169
  
Substandard:                        
Accrual 52,237
 25,083
 64
 754
 78,138
   51,980
 18,969
 10,910
 497
 82,356
  
Nonaccrual 11,485
 3,346
 8,672
 1,839
 25,342
   16,717
 8,753
 2,302
 —
 27,772
  
Doubtful 1,220
 —
 131
 —
 1,351
   4,324
 —
 —
 —
 4,324
  
Total Special Mention and Substandard 77,416
 31,287
 8,867
 6,237
 123,807
 3% 77,021
 38,539
 20,564
 497
 136,621
 2%
Acquired impaired 5,235
 7,401
 9,969
 946
 23,551
 1% 4,964
 3,951
 13,609
 546
 23,070
 —%
Pass 1,305,443
 1,058,065
 1,138,238
 286,134
 3,787,880
 96% 2,258,539
 1,238,404
 2,211,874
 540,653
 6,249,470
 98%
Total $1,388,094
 $1,096,753
 $1,157,074
 $293,317
 $3,935,238
 100% $2,340,524
 $1,280,894
 $2,246,047
 $541,696
 $6,409,161
 100%
(1) 
 Includes commercial small business leases.
(2)
Table includes $479.2 million$2.5 billion of acquired nonimpairednon-impaired loans as of SeptemberJune 30, 2017.2019.


 December 31, 2018
 December 31, 2016 
Commercial
 and Industrial
 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Total
Commercial(1)
(Dollars in thousands) Commercial 
Owner-occupied
Commercial
 
Commercial
Mortgages
 Construction 
Total
Commercial(1)
         Amount %
         Amount %
Risk Rating:                        
Special mention $17,630
 $11,419
 $34,198
 $—
 $63,247
   $8,710
 $21,230
 $—
 $—
 $29,940
  
Substandard:                     

  
Accrual 45,067
 19,871
 239
 2,193
 67,370
   37,424
 21,081
 9,767
 168
 68,440
  
Nonaccrual 1,693
 2,078
 8,574
 —
 12,345
   13,180
 4,406
 3,951
 2,337
 23,874
  
Doubtful 322
 —
 1,247
 —
 1,569
   876
 —
 —
 444
 1,320
  
Total Special Mention and Substandard 64,712
 33,368
 44,258
 2,193
 144,531
 4% 60,190
 46,717
 13,718
 2,949
 123,574
 3%
Acquired impaired 6,183
 12,122
 10,386
 3,694
 32,385
 1% 1,531
 4,248
 7,504
 749
 14,032
 —%
Pass 1,216,836
 1,032,672
 1,108,910
 216,825
 3,575,243
 95% 1,410,768
 1,009,009
 1,141,517
 312,868
 3,874,162
 97%
Total $1,287,731
 $1,078,162
 $1,163,554
 $222,712
 $3,752,159
 100% $1,472,489
 $1,059,974
 $1,162,739
 $316,566
 $4,011,768
 100%
(1) 
Table includes $573.5$350.5 million of acquired nonimpairednon-impaired loans as of December 31, 2016.2018.
Residential and Consumer Credit Exposure
 
 
Residential(2)
 Consumer 
Total Residential and Consumer(3)
 June 30, December 31, June 30, December 31, June 30, 2019 December 31, 2018
(Dollars in thousands) 
Residential(2)
 Consumer 
Total Residential and Consumer(3)
 2019 2018 2019 2018 Amount Percent Amount Percent
 September 30, December 31, September 30, December 31, September 30, 2017 December 31, 2016
 2017 2016 2017 2016 Amount Percent Amount Percent
Nonperforming(1)
 $14,060
 $13,547
 $7,409
 $7,863
 $21,469
 3% $21,410
 3% $12,106
 $11,017
 $7,378
 $7,883
 $19,484
 1% $18,900
 2%
Acquired impaired loans 788
 860
 243
 369
 1,031
 —% 1,229
 —% 7,863
 761
 2,999
 151
 10,862
 —% 912
 —%
Performing 225,869
 252,621
 512,624
 441,797
 738,493
 97% 694,418
 97% 1,045,815
 189,772
 1,116,356
 672,905
 2,162,171
 99% 862,677
 98%
Total $240,717
 $267,028
 $520,276
 $450,029
 $760,993
 100% $717,057
 100% $1,065,784
 $201,550
 $1,126,733
 $680,939
 $2,192,517
 100% $882,489
 100%
(1) 
Includes $14.6$13.9 million as of SeptemberJune 30, 20172019 and $12.4$14.0 million as of December 31, 20162018 of troubled debt restructured mortgages and home equity installment loans that are performing in accordance with the loans’ modified terms and are accruing interest.
(2) 
Residential performing loans excludes $21.4$15.9 million and $22.6$16.5 million of reverse mortgages at fair value as of SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.
(3) 
Total includes $117.3 million$1.2 billion and $150.5$79.5 million in acquired nonimpairednon-impaired loans as of SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.

Troubled Debt Restructurings (TDRs)
TDRs are recorded in accordance with FASB ASC 310-40, Troubled Debt Restructuring by Creditors (ASC 310-40). 

The following table presents the balance of TDRs as of the indicated dates:
(Dollars in thousands) June 30, 2019 December 31, 2018
Performing TDRs $14,203
 $14,953
Nonperforming TDRs 6,966
 10,211
Total TDRs $21,169
 $25,164
(Dollars in thousands) September 30, 2017 December 31, 2016
Performing TDRs $14,905
 $14,336
Nonperforming TDRs 11,114
 8,451
Total TDRs $26,019
 $22,787

Approximately $1.1$0.8 million and $1.3$1.2 million in related reserves have been established for these loans at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively.
The following table presents information regarding the types of loan modifications made for the ninethree and six months ended SeptemberJune 30, 2017:2019 and 2018:
 Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy 
Other (1)
 Total Three months ended June 30, 2019 Six months ended June 30, 2019
Commercial 1
 1
 —
 —
 2
 Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy 
Other(1)
 Total Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy 
Other(1)
 Total
Commercial and Industrial —
 1
 —
 2
 3
 —
 1
 —
 2
 3
Owner-occupied commercial —
 1
 —
 —
 1
 —
 —
 —
 2
 2
 —
 —
 —
 2
 2
Commercial Mortgages —
 —
 —
 1
 1
 1
 —
 —
 1
 2
Construction —
 2
 —
 1
 3
 —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Residential 2
 —
 3
 —
 5
 3
 —
 —
 —
 3
 4
 —
 1
 —
 5
Consumer 1
 —
 11
 6
 18
 3
 1
 —
 —
 4
 6
 1
 1
 —
 8
Total 4
 4
 14
 7
 29
 6
 2
 —
 5
 13
 11
 2
 2
 5
 20
(1)

  Three months ended June 30, 2018 Six months ended June 30, 2018
  Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy 
Other(1)
 Total Contractual payment reduction and term extension Maturity Date Extension Discharged in bankruptcy Other(1) Total
Commercial and Industrial 3
 —
 —
 —
 3
 3
 —
 —
 —
 3
Owner-occupied commercial —
 —
 —
 —
 —
 —
 —
 —
 —
 —
Commercial Mortgages 1
 —
 —
 —
 1
 1
 1
 —
 —
 2
Construction —
 —
 —
 —
 —
 —
 1
 —
 —
 1
Residential 4
 —
 —
 —
 4
 4
 —
 —
 —
 4
Consumer 6
 —
 3
 —
 9
 7
 1
 3
 2
 13
Total 14
 —
 3
 —
 17
 15
 3
 3
 2
 23
(1)Other includes underwriting exceptions.
Other includes underwriting exceptions.
Principal balances are generally not forgiven when a loan is modified as a TDR. Nonaccruing restructured loans remain in nonaccrual status until there has been a period of sustained repayment performance, which is typically six months, and paymentrepayment is reasonably assured.

The following table presents loans identified as TDRs during the three and ninesix months ended SeptemberJune 30, 20172019 and 2016.2018.
  Three Months Ended June 30, Six Months Ended June 30,
  2019 2018 2019 2018
(Dollars in thousands) Pre Modification Post Modification Pre Modification Post Modification Pre Modification Post Modification Pre Modification Post Modification
Commercial $1,347
 $1,347
 $4,782
 $4,782
 $1,347
 $1,347
 $4,782
 $4,782
Owner-occupied commercial 1,435
 1,435
 —
 —
 1,435
 1,435
 —
 —
Commercial mortgages 483
 483
 1,564
 1,564
 514
 514
 2,022
 2,022
Construction —
 —
 —
 —
 —
 —
 920
 920
Residential 321
 321
 469
 469
 423
 423
 469
 469
Consumer 540
 540
 861
 861
 1,408
 1,408
 1,123
 1,123
Total $4,126
 $4,126
 $7,676
 $7,676
 $5,127
 $5,127
 $9,316
 $9,316

  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
(Dollars in thousands) Pre Modification Post Modification Pre Modification Post Modification Pre Modification Post Modification Pre Modification Post Modification
Commercial $—
 $—
 $—
 $—
 $781
 $781
 $1,125
 $1,125
Owner-occupied commercial —
 —
 —
 —
 3,071
 3,071
 —
 —
Commercial mortgages —
 —
 —
 —
 —
 —
 —
 —
Construction —
 —
 —
 —
 1,836
 1,836
 —
 —
Residential 1,058
 1,058
 797
 797
 1,300
 1,300
 1,523
 1,523
Consumer 609
 609
 278
 278
 1,867
 1,867
 733
 733
Total $1,667
 $1,667
 $1,075
 $1,075
 $8,855
 $8,855
 $3,381
 $3,381

During the ninethree and six months ended SeptemberJune 30, 2017,2019, the TDRs set forth in the table above resulted in a $0.1 million and $0.2 million decrease in our allowance for loan losses, respectively, and no increase additional charge-offs. For the three and six months ended June 30, 2018, the TDRs set forth in the table resulted in a decrease of $0.7 million in our allowance for loan losses and also resulted in no$0.1 million additional charge-offs. For
During the same periodthree months ended June 30, 2019, three TDRs defaulted that had received troubled debt modification during the past twelve months with a total loan amount of 2016, the TDRs set forth in the table above increased our allowance for$1.2 million, compared with two loans with a total loan losses byamount of $0.1 million and resulted in charge-offs of $0.1 million. At Septemberduring the three months ended June 30, 2017,2018. During the six months ended June 30, 2019, four TDRs defaulted that had received troubled debt modification during the past twelve months with a total loan amount of $3.7 million.$1.3 million, compared with four TDRs with a total loan amount of $0.2 million during the six months ended June 30, 2018.



7.9. LEASES
As a lessee, the Company enters into leases for its bank branches, corporate offices, and certain equipment. As a lessor, the Company primarily provides financing through our equipment leasing business.

Lessee

Our leases have remaining lease terms of less than 1 year to 43 years, which includes renewal options that are exercised at our discretion. The Company's lease terms to calculate the lease liability and right of use asset include options to extend the lease when it is reasonably certain that the Company will exercise the option. The lease liability and right of use asset is included within Other liabilities and Other assets, respectively, in the unaudited Consolidated Statement of Financial Condition. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense is recognized on a straight-line basis over the lease term. Operating lease expense is included within Occupancy expense in the unaudited Consolidated Statement of Income. We account for lease components separately from nonlease components. We sublease certain real estate to third parties.

The components of operating lease cost were as follows:
  Three months ended Six months ended
(Dollars in thousands) June 30, 2019 June 30, 2019
Operating lease cost (1) (2)
 $11,024
 $16,748
Sublease income (175) (276)
Net lease cost $10,849
 $16,472
(1)
Includes variable lease cost and short-term lease cost.
(2)
Includes accelerated expense due to the previously announced retail branch optimization plan.

Supplemental balance sheet information related to operating leases was as follows:
(Dollars in thousands) June 30, 2019
Assets  
Operating right of use assets $172,458
Total assets $172,458
   
Liabilities  
Operating lease liabilities $186,186
Total liabilities $186,186
   
Lease term and discount rate  
  June 30, 2019
Weighted average remaining lease term (in years)  
Operating leases 19.79
Weighted average discount rate  
Operating leases 4.27%



Maturities of operating lease liabilities under ASC 842, Leases (as adopted on January 1, 2019) were as follows:
(Dollars in thousands) June 30, 2019
2019 $14,479
2020 16,948
2021 16,605
2022 16,557
2023 16,717
After 2023 212,429
Total lease payments 293,735
Less: Interest (107,549)
Present value of lease liabilities $186,186


The minimum cash payments for operating leases under ASC 840, Leases were as follows:
(Dollars in thousands) December 31, 2018
2019 $11,562
2020 11,411
2021 11,132
2022 11,078
2023 11,141
After 2023 169,929
Total minimum lease payments $226,253


Supplemental cash flow information related to leases was as follows:
  Six months ended
(Dollars in thousands) June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:  
Operating cash flows from operating leases $7,941
Right of use assets obtained in exchange for new operating lease liabilities (non-cash) 61,693


Lessor Equipment Leasing

WSFS provides equipment and small business lease financing through our two leasing subsidiaries, BEFC and NewLane Finance Company, acquired from our acquisition of Beneficial on March 1, 2019. Interest income from direct financing leases where the Company is a lessor is recognized in Interest and Fees on Loans and Leases on the Consolidated Statements of Income.

The components of direct finance lease income are summarized in the table below:
  Three months ended Six months ended
(Dollars in thousands) June 30, 2019 June 30, 2019
Direct financing leases:    
Interest income on lease receivable $3,109
 $3,778
Interest income on deferred fees and costs 206
 263
Total direct financing lease income $3,315
 $4,041


Equipment leasing receivables relate to direct financing leases. The composition of the net investment in direct financing leases was as follows:
(Dollars in thousands) June 30, 2019
Lease receivables $176,497
Unearned income (20,321)
Deferred fees and costs 562
Net investment in direct financing leases $156,738


At June 30, 2019, future minimum lease payments to be received for direct financing leases were as follows:
(Dollars in thousands) Direct financing leases
2019 $31,405
2020 54,378
2021 41,351
2022 27,301
2023 16,245
After 2023 5,817
Total lease payments $176,497



10. GOODWILL AND INTANGIBLESINTANGIBLE ASSETS
In accordance with FASB ASC 805, Business Combinations (ASC 805) and FASB ASC 350, Intangibles-GoodwillIntangibles - Goodwill and Other (ASC 350), all assets acquired and liabilities acquiredassumed in purchase acquisitions, including goodwill, indefinite-lived intangibles and other intangibles are recorded at fair value.

During the ninesix months ended SeptemberJune 30, 2017,2019, we determined there were no events or other indicators of impairment as it relates to goodwill or other intangibles.

The following table shows the changes in our goodwill during nine months ended September 30, 2017 as well as the allocation of goodwill to our reportable operating segments for purposes of goodwill impairment testing:
 
(Dollars in thousands)
WSFS
Bank
 
Cash
Connect
 
Wealth
Management
 
Consolidated
Company
December 31, 2018$145,808
 $—
 $20,199
 $166,007
Goodwill from business combinations309,486
 —
 —
 309,486
Remeasurement adjustments(1,781) —
 —
 (1,781)
June 30, 2019$453,513
 $—
 $20,199
 $473,712
  WSFS Cash Wealth Consolidated
(Dollars in thousands) Bank Connect Management Company
December 31, 2016 $147,396
 $—
 $20,143
 $167,539
Remeasurement adjustments (1,588) —
 56
 (1,532)
September 30, 2017 $145,808
 $—
 $20,199
 $166,007

ASC 350 also requires that an acquired intangible asset be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the asset can be sold, transferred, licensed, rented or exchanged, regardless of the acquirer’s intent to do so.
The following tables summarize othertable summarizes our intangible assets:
 September 30, 2017
(Dollars in thousands) Gross Intangible Assets Accumulated Amortization Net Intangible Assets Amortization Period
Gross
Intangible
Assets
 
Accumulated
Amortization
 
Net
Intangible
Assets
 Amortization Period
June 30, 2019      
Core deposits $10,658
 $(3,997) $6,661
 10 years$95,711
 $(8,603) $87,108
 10 years
Customer relationships 17,560
 (3,813) 13,747
 7-15 years17,561
 (6,615) 10,946
 7-15 years
Non-compete agreements 221
 (46) 175
 5 years221
 (124) 97
 5 years
Loan servicing rights 2,056
 (1,161) 895
 10-30 years5,219
 (1,386) 3,833
 10-30 years
Favorable lease asset 1,932
 (301) 1,631
 10 months-18 years
Total intangible assets $32,427
 $(9,318) $23,109
 $118,712
 $(16,728) $101,984
 
December 31, 2018      
Core deposits$10,658
 $(5,285) $5,373
 10 years
Customer relationships17,561
 (5,815) 11,746
 7-15 years
Non-compete agreements221
 (101) 120
 5 years
Loan servicing rights2,652
 (1,301) 1,351
 10-30 years
Favorable lease asset (1)
1,932
 (506) 1,426
 10 months-18 years
Total intangible assets$33,024
 $(13,008) $20,016
 
(1)
The favorable lease asset was fully amortized and written off during the six months ended June 30, 2019 as a result of our adoption of ASU 2016-02 on January 1, 2019. See Note 2 for further information.
  December 31, 2016
(Dollars in thousands) Gross Intangible Assets Accumulated Amortization Net Intangible Assets Amortization Period
Core deposits $13,128
 $(5,630) $7,498
 10 years
Customer relationships 17,561
 (2,612) 14,949
 7-15 years
Non-compete agreements 1,006
 (728) 278
 6 months-5 years
Loan servicing rights 1,708
 (1,067) 641
 10-30 years
Favorable lease asset 458
 (116) 342
 10 months-15 years
Total intangible assets $33,861
 $(10,153) $23,708
  
Core deposits are amortized over their expected lives using the present value of the benefit of the core deposits and either accelerated or straight-line methods of amortization. During the nine months ended September 30, 2017, weWe recognized amortization expense on other intangible assets of $2.3 million.$2.8 million and $4.1 million for the three and six months ended June 30, 2019, respectively, and $0.7 million and $1.4 million for the three and six months ended June 30, 2018, respectively.

The following table showspresents the estimated future amortization expense related toon our intangible assets:
 
(Dollars in thousands) 
Amortization
of Intangibles
Amortization
of Intangibles
Remaining in 2017 $757
2018 2,986
2019 2,918
Remaining in 2019$5,644
2020 2,722
11,105
2021 2,396
10,780
202210,717
202310,689
Thereafter 11,330
53,049
Total $23,109
$101,984


11. DEPOSITS
8.
The following table shows our deposits by category:
(Dollars in thousands) June 30, 2019 December 31, 2018
Noninterest-bearing:    
 Noninterest demand $2,205,992
 $1,626,252
  Total noninterest-bearing $2,205,992
 $1,626,252
       
Interest-bearing:    
 Interest-bearing demand $2,039,545
 $1,062,228
 Savings 1,600,879
 538,213
 Money market 1,987,485
 1,542,962
 Customer time deposits 1,437,650
 672,942
 Brokered deposits 323,159
 197,834
  Total interest-bearing 7,388,718
 4,014,179
  Total deposits $9,594,710
 $5,640,431



12. ASSOCIATE BENEFIT PLANS
Postretirement Medical Benefits
We share certain costs of providing health and life insurance benefits to eligible retired Associates (employees) and their eligible dependents. Previously, all Associates were eligible for these benefits if they reached normal retirement age while working for us. Effective March 31, 2014, we changed the eligibility of this plan to include only those Associates who have achieved ten years of service with us as of March 31, 2014. As of December 31, 2014, we began to use the mortality table issued by the Office of the Actuary of the U.S. Bureau of Census in October 2014 in our calculation.
We account for our obligations under the provisions of FASB ASC 715, Compensation - Retirement Benefits (ASC 715). ASC 715 requires that we recognize the costs of these benefits over an Associate’s active working career. Amortization of unrecognized net gains or losses resulting from experience different from that assumed and from changes in assumptions is included as a component of net periodic benefit cost over the remaining service period of active employees to the extent that such gains and losses exceed 10% of the accumulated postretirement benefit obligation, as of the beginning of the year.
The following are disclosures of the We recognize our net periodic benefit cost in Salaries, benefits and other compensation in our unaudited Consolidated Statements of Income.
The following table presents the components of net periodic benefit cost related to our postretirement medical benefits plan measured at January 1, 20172019 and 2016.2018.
  Three months ended June 30, Six months ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Service cost $14
 $15
 $27
 $30
Interest cost 19
 18
 38
 35
Prior service cost amortization (19) (19) (38) (38)
Net gain recognition (16) (12) (31) (23)
Net periodic benefit cost $(2) $2
 $(4) $4

  Three months ended September 30, Nine months ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
Service cost $11
 $14
 $40
 $43
Interest cost 16
 19
 54
 57
Prior service cost amortization (19) (18) (57) (44)
Net gain recognition (18) (16) (52) (47)
Net periodic benefit cost $(10) $(1) $(15) $9


Alliance Associate Pension Plan


During the fourth quarter of 2015, we completed the acquisition of Alliance and its wholly owned subsidiary, Alliance Bank, headquartered in Broomall, Pennsylvania. At the time of the acquisition, we assumed the Alliance pension plan offered to its current associates.

Associates.
The following table showspresents the components of net periodic benefit cost components forrelated to the Alliance Associate Pension Plan benefits measured at January 1, 2017.2019 and 2018.
  Three months ended June 30, Six months ended June 30,
(Dollars in thousands) 2019 2018 2019 2018
Service cost $10
 $10
 $20
 $20
Interest cost 69
 74
 138
 147
Expected return on plan assets (148) (137) (295) (272)
Prior service cost amortization —
 —
 —
 —
Net gain recognition —
 —
 —
 —
Net periodic benefit cost $(69) $(53) $(137) $(105)

(Dollars in thousands) Three months ended September 30, 2017 Nine months ended September 30, 2017
Service cost $10
 $30
Interest cost 75
 225
Expected Return on Plan Assets (135) (405)
Prior service cost amortization —
 —
Net gain recognition —
 —
Net periodic benefit cost $(50) $(150)

During the fourth quarter of 2018, the Company notified the Alliance pension plan participants, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation of its intention to terminate the plan. The Company anticipates completing the pension plan termination in the second half of 2019. As of June 30, 2019, the valuation of the benefit obligations and estimated future benefit payments did not include termination assumptions.
9.

Beneficial Associate Pension and other postretirement benefits plans
On March 1, 2019, we closed our acquisition of Beneficial. At the time of the acquisition, we assumed the pension plan covering certain eligible Beneficial Associates. The plan was frozen in 2008.
The following table presents the components of net periodic benefit cost related to the Beneficial pension benefits and other postretirement benefit plans.
  Three months ended June 30, 2019 Six months ended June 30, 2019 Three months ended June 30, 2019 Six months ended June 30, 2019
(Dollars in thousands) Pension Benefits Other Postretirement Benefits
Service cost $—
 $—
 $23
 $30
Interest cost 857
 1,142
 177
 236
Expected return on plan assets (1,442) (1,923) —
 —
Prior service cost amortization —
 —
 —
 —
Net gain recognition —
 —
 —
 —
Net periodic benefit cost $(585) $(781) $200
 $266








13. INCOME TAXES
We account for income taxes in accordance with FASB ASC 740, Income Taxes (ASC 740). ASC 740 requires the recording of deferred income taxes that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We exercise significant judgment in the evaluation of the amount and timing of the recognition of the resulting tax assets and liabilities. The judgments and estimates required for the evaluation are updated based on changes in business factors and the tax laws. If actual results differ from the assumptions and other considerations used in estimating the amount and timing of tax recognized, there can be no assurance that additional expenses will not be required in future periods.
ASC 740 prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. We recognize, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the financial statements. Assessment of uncertain tax positions under ASC 740 requires careful consideration of the technical merits of a position based on our analysis of tax regulations and interpretations.
There were no unrecognized tax benefits as of SeptemberJune 30, 2017.2019. We record interest and penalties on potential income tax deficiencies as income tax expense. Our federal and state tax returns for the 20142015 through 20162018 tax years are subject to examination as of SeptemberJune 30, 2017.2019. We do not expect to record or realize any material unrecognized tax benefits during 2017.2019.
As a result of the adoption of ASU No. 2014-01, “Investments-Equity Method and Joint Ventures: Accounting for Investments in Qualified Affordable Housing Projects,” the amortization of our low-income housing credit investments has been reflected as income tax expense. Accordingly, $0.4$0.6 million and $0.5 million of such amortization has been reflected as income tax expense for the three months ended SeptemberJune 30, 20172019 and September 30, 2016,2018, respectively, and $1.2$1.3 million and $0.9 million of such amortization has been reflected as income tax expense for the ninesix months ended SeptemberJune 30, 20172019 and September 30, 2016.2018, respectively .
The amount of affordable housing tax credits, amortization and tax benefits recorded as income tax expense for the ninesix months ended SeptemberJune 30, 20172019 were $1.2 million, $1.2$1.3 million and $0.3$0.2 million, respectively. The carrying value of the investment in affordable housing credits is $14.2$15.6 million at SeptemberJune 30, 2017,2019, compared to $15.4$16.9 million at December 31, 2016.2018.

10.14. FAIR VALUE DISCLOSURES OF FINANCIAL ASSETS AND LIABILITIES
FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820-10 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into the following three levels:
Level 1: Inputs to the valuation methodology are quoted prices, unadjusted, for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.
Level 2: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; inputs to the valuation methodology include quoted prices for identical or similar assets or liabilities in markets that are not active; or inputs to the valuation methodology that are derived principally from or can be corroborated by observable market data by correlation or other means.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using discounted cash flow methodologies, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The following tables present financial instruments carried at fair value as of SeptemberJune 30, 20172019 and December 31, 20162018 by level in the valuation hierarchy (as described above):
  June 30, 2019
(Dollars in thousands) 
Quoted
Prices in
Active
Markets for
Identical
Asset
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets measured at fair value on a recurring basis:        
Available-for-sale securities:        
CMO $—
 $372,235
 $—
 $372,235
FNMA MBS —
 1,052,395
 —
 1,052,395
FHLMC MBS —
 336,583
 —
 336,583
GNMA MBS —
 35,657
 —
 35,657
Other assets —
 4,995
 —
 4,995
Total assets measured at fair value on a recurring basis $—
 $1,801,865
 $—
 $1,801,865
         
Liabilities measured at fair value on a recurring basis:        
Other liabilities $—
 $4,562
 $—
 $4,562
         
Assets measured at fair value on a nonrecurring basis:        
Other investments $—
 $—
 $48,711
 $48,711
Other real estate owned —
 —
 3,703
 3,703
Loans held for sale —
 51,721
 —
 51,721
Impaired loans, net —
 —
 49,458
 49,458
Total assets measured at fair value on a nonrecurring basis $—
 $51,721
 $101,872
 $153,593
  September 30, 2017
(Dollars in thousands) 
Quoted
Prices in
Active
Markets for
Identical
Asset
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets measured at fair value on a recurring basis:        
Available-for-sale securities:        
CMO $—
 $267,808
 $—
 $267,808
FNMA MBS —
 431,242
 —
 431,242
FHLMC MBS —
 85,062
 —
 85,062
GNMA MBS —
 25,697
 —
 25,697
Other investments 624
 —
 —
 624
Other assets —
 1,338
 —
 1,338
Total assets measured at fair value on a recurring basis $624
 $811,147
 $—
 $811,771
         
Liabilities measured at fair value on a recurring basis:        
Other liabilities $—
 $2,736
 $—
 $2,736
         
Assets measured at fair value on a nonrecurring basis:        
Other real estate owned $—
 $—
 $3,924
 $3,924
Loans held for sale —
 19,313
 —
 19,313
Impaired loans, net —
 —
 52,903
 52,903
Total assets measured at fair value on a nonrecurring basis $—
 $19,313
 $56,827
 $76,140


  December 31, 2018
(Dollars in thousands) 
Quoted
Prices in
Active
Markets for
Identical
Asset
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets measured at fair value on a recurring basis:        
Available-for-sale securities:        
CMO $—
 $371,750
 $—
 $371,750
FNMA MBS —
 644,073
 —
 644,073
FHLMC MBS —
 153,922
 —
 153,922
GNMA MBS —
 35,334
 —
 35,334
Other assets —
 2,098
 —
 2,098
Total assets measured at fair value on a recurring basis $—
 $1,207,177
 $—
 $1,207,177
         
Liabilities measured at fair value on a recurring basis:        
Other liabilities $—
 $3,493
 $—
 $3,493
         
Assets measured at fair value on a nonrecurring basis        
Other investments —
 —
 37,233
 37,233
Other real estate owned —
 —
 2,668
 2,668
Loans held for sale —
 25,318
 —
 25,318
Impaired loans, net —
 —
 47,094
 47,094
Total assets measured at fair value on a nonrecurring basis $—
 $25,318
 $86,995
 $112,313
  December 31, 2016
(Dollars in thousands) 
Quoted
Prices in
Active
Markets for
Identical
Asset
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total Fair
Value
Assets measured at fair value on a recurring basis:        
Available-for-sale securities:        
CMO $—
 $261,215
 $—
 $261,215
FNMA MBS —
 405,764
 —
 405,764
FHLMC MBS —
 63,515
 —
 63,515
GNMA MBS —
 28,416
 —
 28,416
GSE —
 35,010
 —
 35,010
Other investments 623
 —
 —
 623
Other assets —
 1,508
 —
 1,508
Total assets measured at fair value on a recurring basis $623
 $795,428
 $—
 $796,051
         
Liabilities measured at fair value on a recurring basis:        
Other liabilities $—
 $3,380
 $—
 $3,380
         
Assets measured at fair value on a nonrecurring basis        
Other real estate owned $—
 $—
 $3,591
 $3,591
Loans held for sale —
 54,782
 —
 54,782
Impaired loans, net —
 —
 46,499
 46,499
Total assets measured at fair value on a nonrecurring basis $—
 $54,782
 $50,090
 $104,872

There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the ninesix months ended SeptemberJune 30, 2017.2019.

Fair value is based on quoted market prices, where available. If such quoted market prices are not available, fair value is based on internally developed models or obtained from third parties that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include unobservable parameters. Our valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While we believe our valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
Available-for-sale securities
As of SeptemberJune 30, 2017,2019, securities classified as available-for-sale are reported at fair value using Level 2 inputs, except for one mutual fund asset acquired as part of the Penn Liberty acquisition, which is categorized as Level 1.inputs. Included in the Level 2 total are $809.8 million$1.8 billion in Federal Agency MBS. We believe that this Level 2 designation is appropriate for these securities under ASC 820-10 because, as with almost all fixed income securities, none are exchange traded, and all are priced by correlation to observed market data. For these securities we obtain fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, U.S. government and agency yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other factors.
Other investments
Other investments includes our investments in equity securities without readily determinable fair values. These investments include, among others, our Visa Class B shares and our investments in Spring EQ and SoFi, all of which are categorized as Level 3. Our Visa Class B ownership includes shares acquired at no cost from our prior participation in Visa’s network while Visa operated as a cooperative as well as shares subsequently acquired through private transactions and auctions.
Our equity investments without readily determinable fair values are held at cost, and are adjusted for any observable transactions during the reporting period. As a result of our adoption of ASU 2016-01 and observable market transactions, we recorded unrealized gains on our investments in Visa Class B shares and Spring EQ of $4.8 million during the six months ended June 30, 2019 as compared to $15.3 million during the six months ended June 30, 2018.
Other real estate owned
Other real estate owned consists of loan collateral which has been repossessed through foreclosure or other measures. Initially, foreclosed assets are recorded at the lower of the loan balance or fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically and the assets may be marked down further, reflecting a new cost basis. The fair value of our real estate owned was estimated using Level 3 inputs based on appraisals obtained from third parties.

Loans held for sale
The fair value of our loans held for sale is based on estimates using Level 2 inputs. These inputs are based on pricing information obtained from wholesale mortgage banks and brokers and applied to loans with similar interest rates and maturities.
Impaired loans
We evaluate and value impaired loans at the time the loan is identified as impaired, and the fair values of such loans are estimated using Level 3 inputs in the fair value hierarchy. Each loan’s collateral has a unique appraisal and management’s discount of the value is based on the factors unique to each impaired loan. The significant unobservable input in determining the fair value is management’s subjective discount on appraisals of the collateral securing the loan, which rangetypically ranges from 10% - 50%20%. Collateral may consist of real estate and/or business assets including equipment, inventory and/or accounts receivable and the value of these assets is determined based on the appraisals by qualified licensed appraisers hired by us. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, estimated costs to sell, and/or management’s expertise and knowledge of the client and the client’s business.
The gross amount of impaired loans, which are measured for impairment by either calculating the expected future cash flows discounted at the loan’s effective interest rate or determining the fair value of the collateral for collateral dependent loans was $55.9$54.6 million and $51.6$49.4 million at SeptemberJune 30, 20172019 and December 31, 2016,2018, respectively. The valuation allowance on impaired loans was $2.9$5.2 million as of SeptemberJune 30, 20172019 and $3.4$2.3 million as of December 31, 2016.2018.

FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported fair values of financial instruments are based on a variety of factors. In certain cases, fair values represent quoted market prices for identical or comparable instruments. In other cases, fair values have been estimated based on assumptions regarding the amount and timing of estimated future cash flows that are discounted to reflect current market rates and varying degrees of risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of period-end or that will be realized in the future.
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents
For cash and short-term investment securities, including due from banks, federal funds sold or purchased under agreements to resell and interest-bearing deposits with other banks, the carrying amount is a reasonable estimate of fair value.
Investment securities
Fair value is estimated using quoted prices for similar securities, which we obtain from a third party vendor. We utilize one of the largest providers of securities pricing to the industry and management periodically assesses the inputs used by this vendor to price the various types of securities owned by us to validate the vendor’s methodology as described above in available-for-sale securities.
Other investments
Other investments includes our investments in equity securities with and without readily determinable fair values (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans held for sale
Loans held for sale are carried at their fair value (see discussion in “Fair Value of Financial Assets and Liabilities” section above).
Loans
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type: commercial, commercial small business leases, commercial mortgages, owner-occupied commercial, construction, residential mortgages and consumer. For loans that reprice frequently, the book value approximates fair value. The fair values of other types of loans, with the exception of reverse mortgages, are estimated by discounting expected cash flows using the current rates at which similar loans would be made to borrowers with comparable credit ratings and for similar remaining maturities. The fair values of reverse mortgages are based on the net present value of the expected cash flows using a discount rate specific to the reverse mortgages portfolio. The fair value of nonperforming loans is based on recent external appraisals of the underlying collateral. Estimated cash flows, discounted using a rate commensurate with current rates and the risk associated with the estimated cash flows, are utilizedused if appraisals are not available. This technique does not contemplate an exit price.
Stock in the Federal Home Loan Bank (FHLB) of Pittsburgh

The fair value of FHLB stock is assumed to be equal to its cost basis, since the stock is non-marketable but redeemable at its par value.
Other assets
Other assets includes, among others, other real estate ownedthings, investments in subsidiaries, prepaid expenses, interest and fee income receivable, derivative financial instruments and deferred tax assets (see discussion earlier in this note)“Fair Value of Financial Assets and our investment in Visa Class B stock. Our ownership includes shares acquired at no cost from our prior participation in Visa’s network, while Visa operated as a cooperative. During 2016 and 2017 we purchased additional shares which are accounted for as non-marketable equity securities and carried at cost. We evaluate the shares carried at cost for OTTI periodically. As of September 30, 2017, our evaluation indicated that there was no OTTI of these shares. Following resolution of Visa’s covered litigation, shares of Visa’s Class B stock will be converted to Visa Class A shares.Liabilities” section above).

Only current owners of Class B shares are allowed to purchase other Class B shares.  We estimate the value of our Visa Class B shares to be $44.1 million as of September 30, 2017.

Deposits
The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, money market and interest-bearing demand deposits, is assumed to be equal to the amount payable on demand. The fair value of time deposits is based on the discounted value of contractual cash flows. The discount rate is estimated using rates currently offered for deposits with comparable remaining maturities.
Borrowed funds
Rates currently available to us for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt.
Other Liabilities
Other liabilities includes, among others, cash flow derivatives and derivativederivatives on the residential mortgage held for sale pipeline. Valuation of our cash flow derivativederivatives is obtained from an independent pricing service and also from the derivative counterparty. Valuation forof the derivative related to the residential mortgage held for sale pipeline is based on valuation of the loans held for sale portfolio as described above in Loans held for sale.sale.
Off-balance sheet instruments
The fair value of off-balance sheet instruments, including commitments to extend credit and standby letters of credit, approximates the recorded net deferred fee amounts, which are not significant. Because commitments to extend credit and letters of credit are generally not assignable by either us or the borrower, they only have value to us and the borrower.

The book value and estimated fair value of our financial instruments are as follows:
 
 June 30, 2019 December 31, 2018
(Dollars in thousands) September 30, 2017 December 31, 2016 
Fair Value
Measurement
 Book Value Fair Value Book Value Fair Value
 
Fair Value
Measurement
 Book Value Fair Value Book Value Fair Value
Financial assets:                
Cash and cash equivalents Level 1 $733,365
 $733,365
 $821,923
 $821,923
 Level 1 $521,825
 $521,825
 $620,757
 $620,757
Investment securities available for sale See previous table 810,433
 810,433
 794,543
 794,543
 See previous table 1,796,870
 1,796,870
 1,205,079
 1,205,079
Investment securities held to maturity Level 2 161,721
 163,397
 164,346
 163,232
 Level 2 143,317
 145,867
 149,950
 149,431
Other investments Level 3 48,711
 48,711
 37,233
 37,233
Loans, held for sale Level 2 19,313
 19,313
 54,782
 54,782
 Level 2 51,721
 51,721
 25,318
 25,318
Loans, net(1)(2)
 Level 2,3 4,617,313
 4,596,437
 4,397,876
 4,300,963
 Level 3 8,518,251
 8,739,014
 4,816,825
 4,772,377
Impaired loans, net Level 3 52,903
 52,903
 46,499
 46,499
 Level 3 49,458
 49,458
 47,094
 47,094
Stock in FHLB of Pittsburgh Level 2 33,277
 33,277
 38,248
 38,248
 Level 2 15,874
 15,874
 19,259
 19,259
Accrued interest receivable Level 2 17,789
 17,789
 17,027
 17,027
 Level 2 40,784
 40,784
 22,001
 22,001
Other assets Level 3 19,618
 49,697
 9,189
 15,787
 Level 2 4,995
 4,995
 2,098
 2,098
Financial liabilities:                
Deposits Level 2 5,051,719
 4,681,111
 4,738,438
 4,423,921
 Level 2 9,594,710
 9,680,779
 5,640,431
 5,597,227
Borrowed funds Level 2 1,003,308
 999,551
 1,267,447
 1,264,170
 Level 2 415,131
 415,155
 699,788
 694,526
Standby letters of credit Level 3 463
 463
 468
 468
 Level 3 407
 407
 495
 495
Accrued interest payable Level 2 3,882
 3,882
 1,151
 1,151
 Level 2 7,064
 7,064
 1,900
 1,900
Other liabilities Level 2 2,736
 2,736
 3,380
 3,380
 Level 2 4,562
 4,579
 3,493
 3,493
 (1) Excludes impaired loans, net.
 (2) Includes reverse mortgage loans, which are categorized as Level 3.loans.
At SeptemberJune 30, 20172019 and December 31, 20162018 we had no commitments to extend credit measured at fair value.

11.15. DERIVATIVE FINANCIAL INSTRUMENTS
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both economic conditions and our business operations. We principally manage our exposures to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our assets and liabilities. We manage a matched book with respect to our derivative instruments in order to minimize our net risk exposure resulting from such transactions. Our cash flow hedging program began in the third quarter of 2016.
Fair Values of Derivative Instruments
The table below presents the fair value of our derivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of June 30, 2019.
 Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location 
Derivatives
(Fair Value)
Derivatives designated as hedging instruments:        
Interest rate products 3 $75,000
 Other Liabilities $(1,075)
Total   $75,000
   $(1,075)
Derivatives not designated as hedging instruments:        
Interest rate products   $80,996
 Other Assets $3,043
Interest rate products   80,996
 Other Liabilities (3,247)
Risk participation agreements   5,455
 Other Liabilities (7)
Interest rate lock commitments with customers
  108,345
 Other Assets 1,727
Interest rate lock commitments with customers
  5,693
 Other Liabilities (13)
Forward sale commitments
  47,607
 Other Assets 225
Forward sale commitments
  65,116
 Other Liabilities (220)
Total
  $394,208
   $1,508
Total derivatives
  $469,208
   $433

The table below presents the fair value of our derivative financial instruments as well as their location on the Consolidated Statements of Financial Condition as of September 30, 2017.December 31, 2018.
 Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location 
Derivatives
(Fair Value)
Derivatives designated as hedging instruments:        
Interest rate products 3 $75,000
 Other Liabilities $(3,308)
Total   $75,000
   $(3,308)
Derivatives not designated as hedging instruments:        
Interest rate lock commitments with customers
  $40,795
 Other Assets $686
Interest rate lock commitments with customers
  6,530
 Other Liabilities (24)
Forward sale commitments
  19,732
 Other Assets 143
Forward sale commitments
  25,876
 Other Liabilities (161)
Total
  $92,933
   $644
Total derivatives
  $167,933
   $(2,664)

 Fair Values of Derivative Instruments
(Dollars in thousands) Count Notional Balance Sheet Location Liability Derivatives (Fair Value)
Derivatives designated as hedging instruments:        
Interest rate products 3
 $75,000
 Other Liabilities $2,556
Total derivatives designated as hedging instruments       $2,556




Cash Flow Hedges of Interest Rate Risk
Our objectives in using interest rate derivatives are to add stability to interest income and to manage our exposure to interest rate movements. To accomplish this objective, we primarily use interest rate swaps as part of our interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for us making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

The effective portion of changes inChanges to the fair value of derivatives designated and that qualify as cash flow hedges isare recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. During the ninesix months ended SeptemberJune 30, 2017,2019, such derivatives were used to hedge the variable cash flows associated with a variable rate loan pool. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the nine months ended September 30, 2017, we did not record any hedge ineffectiveness.
Amounts reported in accumulated other comprehensive income (loss) related to derivatives are reclassified to interest income as interest payments are received on our variable-rate pooled loans. During the next twelve months, we estimate that $0.3$0.6 million will be reclassified as an increase to interest income. During the ninesix months ended SeptemberJune 30, 2017, $0.12019, $0.7 million was reclassified into interest income.
We are hedging our exposure to the variability in future cash flows for forecasted transactions over a maximum period of 1one month (excluding forecasted transactions related to the payment of variable interest on existing financial instruments).
As of SeptemberJune 30, 2017,2019, we had three outstanding interest rate derivatives with aan aggregate notional amount of $75 million that were designated as cash flow hedges of interest rate risk.
Effect of Derivative Instruments on the Income Statement
The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the three and ninesix months ended SeptemberJune 30, 20172019 and SeptemberJune 30, 2016.2018.
  Amount of (Loss) or Gain Recognized in OCI on Derivative (Effective Portion) Amount of (Loss) or Gain Recognized in OCI on Derivative (Effective Portion) Location of (Loss) or Gain Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30,  
Derivatives in Cash Flow Hedging Relationships 2019 2018 2019 2018  
Interest Rate Products $(1,007) $(246) $(1,637) $(1,010) Interest income
Total $(1,007) $(246) $(1,637) $(1,010)  
       
  Amount of Gain or (Loss) Recognized in Income Amount of Gain or (Loss) Recognized in Income Location of Gain or (Loss) Recognized in Income
(Dollars in thousands) Three Months Ended June 30, Six Months Ended June 30,  
Derivatives Not Designated as a Hedging Instrument 2019 2018 2019 2018  
Interest Rate Lock Commitments $542
 $96
 $1,174
 $(296) Mortgage banking activities, net
Forward Sale Commitments (487) $60
 (721) $(332) Mortgage banking activities, net
Total $55
 $156
 $453
 $(628)  

(Dollars in thousands) Amount of Gain Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss)Reclassified from Accumulated OCI into Income (Effective Portion)
  Three months ended September 30,  
Derivatives in Cash Flow Hedging Relationships 2017 2016  
Interest Rate Products $42
 $—
 Interest income
Total $42
 $—
  
(Dollars in thousands) Amount of Gain Recognized in OCI on Derivative (Effective Portion) Location of Gain or (Loss)Reclassified from Accumulated OCI into Income (Effective Portion)
  Nine months ended September 30,  
Derivatives in Cash Flow Hedging Relationships 2017 2016  
Interest Rate Products $192
 $—
 Interest income
Total $192
 $—
  


Credit risk-related Contingent Features
We have agreements with certain of our derivative counterparties that contain a provision where if we default on any of our indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared in default on our derivative obligations.
We also have agreements with certain of our derivative counterparties that contain a provision where if we fail to maintain our status as a well/well-capitalized or adequately capitalized institution, then the counterparty could terminate the derivative positions and we would be required to settle our obligations under the agreements.
As of SeptemberJune 30, 2017,2019, the termination value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $2.6$1.2 million. We have minimum collateral posting thresholds with certain of our derivative counterparties, and have posted collateral of $3.4$6.6 million against our obligations under these agreements. If we had breached any of these provisions at SeptemberJune 30, 2017,2019, we could have been required to settle our obligations under the agreements at the termination value.

12.16. SEGMENT INFORMATION
As defined in FASB ASC 280, Segment Reporting (ASC 280), an operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. We evaluate performance based on pretax net income relative to resources used, and allocate resources based on these results. The accounting policies applicable to our segments are those that apply to our preparation of the accompanying unaudited Consolidated Financial Statements. Based on these criteria, we have identified three segments: WSFS Bank, Cash Connect®, and Wealth Management.
The WSFS Bank segment provides financial products to commercial and retail customers. Retail and Commercial Banking, Commercial Real Estate Lending and other banking business units are operating departments of WSFS Bank. These departments share the same regulator, the same market, many of the same customers and provide similar products and services through the general infrastructure of the Bank. Accordingly, these departments are not considered discrete segments and are appropriately aggregated within the WSFS Bank segment in accordance with ASC 280.
Our Cash Connect® segment provides ATM vault cash, and smart safe and other cash logistics services through strategic partnerships with several of the largest networks, manufacturers and service providers in the ATM industry. Cash Connect® services non-bank and WSFS-branded ATMs and retail safes nationwide. The balance sheet category “Cash“Cash in non-owned ATMs”ATMs” includes cash from which fee income is earned through bailment arrangements with customers of Cash Connect®.
The Wealth Management segment provides a broad array of fiduciary,planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate, and institutional clients through six business lines.multiple integrated businesses.  WSFS Wealth Investments provides financial advisory services along with insurance and brokerage products primarily to our retail banking clients.products. Cypress, a registered investment adviser, whose primary market segment is high-net-worth individuals, offers a "balanced"fee-only wealth management firm managing a “balanced” investment style portfolio focused on preservation of capital and providinggenerating current income. West Capital, a registered investment adviser, is a fee-only wealth management firm which operatesoperating under a multi-family office philosophy and provides fully-customizedto provide customized solutions tailored to the unique needs of institutions and high-net-worth individuals. Christiana TrustThe institutional trust division of WSFS (doing business as WSFS Institutional Services) provides fiduciary and investment services to personal trust clients, and trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional and corporate clients. The personal trust division of WSFS (doing business as Christiana Trust) provides personal trust and institutional clients.fiduciary services to families and individuals across the U.S. Powdermill is a multi-family office that specializesspecializing in providing unique, independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Private BankingWealth Client Management serves high-net-worth clients by delivering credit and deposit products and partnering with other businessWealth Management units to deliver investment management and fiduciary products and services.provide comprehensive solutions to clients.


The following table showstables show segment results for the three and six months ended SeptemberJune 30, 20172019 and 2016:2018:
  Three Months Ended June 30, 2019 Three Months Ended June 30, 2018
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 
Wealth
Management
 Total WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total
Statements of Income                
External customer revenues:                
Interest income $140,231
 $—
 $2,672
 $142,903
 $69,599
 $—
 $2,552
 $72,151
Noninterest income 18,870
 13,355
 10,646
 42,871
 12,045
 12,328
 10,614
 34,987
Total external customer revenues 159,101
 13,355
 13,318
 185,774
 81,644
 12,328
 13,166
 107,138
Inter-segment revenues:                
Interest income 3,345
 —
 4,052
 7,397
 3,565
 —
 2,670
 6,235
Noninterest income 2,156
 192
 211
 2,559
 2,219
 200
 37
 2,456
Total inter-segment revenues 5,501
 192
 4,263
 9,956
 5,784
 200
 2,707
 8,691
Total revenue 164,602
 13,547
 17,581
 195,730
 87,428
 12,528
 15,873
 115,829
External customer expenses:                
Interest expense 18,282
 —
 1,389
 19,671
 10,599
 —
 563
 11,162
Noninterest expenses 91,415
 8,893
 7,540
 107,848
 42,505
 7,905
 7,421
 57,831
Provision for loan losses 12,239
 —
 (44) 12,195
 2,284
 —
 214
 2,498
Total external customer expenses 121,936
 8,893
 8,885
 139,714
 55,388
 7,905
 8,198
 71,491
Inter-segment expenses:                
Interest expense 4,052
 2,203
 1,142
 7,397
 2,670
 2,516
 1,049
 6,235
Noninterest expenses 403
 698
 1,458
 2,559
 237
 637
 1,582
 2,456
Total inter-segment expenses 4,455
 2,901
 2,600
 9,956
 2,907
 3,153
 2,631
 8,691
Total expenses 126,391
 11,794
 11,485
 149,670
 58,295
 11,058
 10,829
 80,182
Income before taxes $38,211
 $1,753
 $6,096
 $46,060
 $29,133
 $1,470
 $5,044
 $35,647
Income tax provision       10,091
       6,907
Consolidated net income       35,969
       28,740
Net loss attributable to noncontrolling interest       (231)       —
Net income attributable to WSFS       36,200
       28,740


 Three months ended September 30, 2017 Three months ended September 30, 2016 Six Months Ended June 30, 2019 Six Months Ended June 30, 2018
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 
Wealth
Management
 Total WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total WSFS Bank 
Cash
Connect®
 
Wealth
Management
 Total WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total
Statement of Income                
Statements of Income                
External customer revenues:                                
Interest income $62,748
 $—
 $2,262
 $65,010
 53,332
 —
 2,005
 55,337
 $237,177
 $—
 $5,303
 $242,480
 $134,889
 $—
 $4,875
 $139,764
Noninterest income 12,102
 11,212
 9,127
 32,441
 11,957
 9,369
(r) 
6,260
 27,586
 36,134
 25,757
 22,102
 83,993
 38,651
 23,681
 20,122
 82,454
Total external customer revenues 74,850
 11,212
 11,389
 97,451
 65,289
 9,369
 8,265
 82,923
 273,311
 25,757
 27,405
 326,473
 173,540
 23,681
 24,997
 222,218
Inter-segment revenues:                 —
              
Interest income 2,537
 —
 2,235
 4,772
 1,302
 —
 1,698
 3,000
 7,137
 —
 8,057
 15,194
 6,533
 —
 5,033
 11,566
Noninterest income 1,721
 213
 37
 1,971
 2,140
 229
 27
 2,396
 4,039
 369
 397
 4,805
 4,327
 381
 71
 4,779
Total inter-segment revenues 4,258
 213
 2,272
 6,743
 3,442
 229
 1,725
 5,396
 11,176
 369
 8,454
 19,999
 10,860
 381
 5,104
 16,345
Total revenue 79,108
 11,425
 13,661
 104,194
 68,731
 9,598
 9,990
 88,319
 284,487
 26,126
 35,859
 346,472
 184,400
 24,062
 30,101
 238,563
External customer expenses:                 —
              
Interest expense 8,542
 —
 339
 8,881
 6,113
 —
 203
 6,316
 33,418
 —
 2,516
 35,934
 20,102
 —
 959
 21,061
Noninterest expenses 39,546
 7,048
 7,569
 54,163
 40,991
 5,743
(r) 
4,500
 51,234
 173,992
 16,923
 14,525
 205,440
 81,940
 15,224
 14,079
 111,243
Provision for loan losses 3,065
 —
 (169) 2,896
 5,669
 —
 159
 5,828
 19,525
 —
 324
 19,849
 5,945
 —
 203
 6,148
Total external customer expenses 51,153
 7,048
 7,739
 65,940
 52,773
 5,743
 4,862
 63,378
 226,935
 16,923
 17,365
 261,223
 107,987
 15,224
 15,241
 138,452
Inter-segment expenses:                 —
              
Interest expense 2,235
 1,856
 681
 4,772
 1,698
 790
 512
 3,000
 8,057
 4,761
 2,376
 15,194
 5,033
 4,575
 1,958
 11,566
Noninterest expenses 250
 556
 1,165
 1,971
 256
 744
 1,396
 2,396
 766
 1,243
 2,796
 4,805
 452
 1,309
 3,018
 4,779
Total inter-segment expenses 2,485
 2,412
 1,846
 6,743
 1,954
 1,534
 1,908
 5,396
 8,823
 6,004
 5,172
 19,999
 5,485
 5,884
 4,976
 16,345
Total expenses 53,638
 9,460
 9,585
 72,683
 54,727
 7,277
 6,770
 68,774
 235,758
 22,927
 22,537
 281,222
 113,472
 21,108
 20,217
 154,797
Income before taxes $25,470
 $1,965
 $4,076
 $31,511
 $14,004
 $2,321
 $3,220
 $19,545
 $48,729
 $3,199
 $13,322
 $65,250
 $70,928
 $2,954
 $9,884
 $83,766
Income tax provision       10,942
       6,823
       16,351
       17,676
Consolidated net income       $20,569
       $12,722
       48,899
       66,090
                
Capital expenditures $2,688
 $35
 $117
 $2,840
 $10,900
 $248
 $11
 $11,159
Net loss attributable to noncontrolling interest       (324)       —
Net income attributable to WSFS       49,223
       66,090

(r) Noninterest income and noninterest expense for the period ended September 30, 2016 have been restated to correct an immaterial error related to revenue earned for cash servicing fees. See Note 1 - Basis of Presentation for further information.






The following table shows segment results for the nine months ended September 30, 2017 and 2016:

  Nine months ended September 30, 2017 Nine months ended September 30, 2016
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total
Statement of Income                
External customer revenues:                
Interest income $181,670
 $—
 $6,500
 $188,170
 $150,862
 $—
 $6,024
 $156,886
Noninterest income 34,318
 31,403
 26,488
 92,209
 31,982
 26,437
(r) 
18,343
 76,762
Total external customer revenues 215,988
 31,403
 32,988
 280,379
 182,844
 26,437
 24,367
 233,648
Inter-segment revenues:                
Interest income 6,780
 —
 6,735
 13,515
 3,498
 —
 5,245
 8,743
Noninterest income 5,791
 611
 113
 6,515
 6,211
 632
 76
 6,919
Total inter-segment revenues 12,571
 611
 6,848
 20,030
 9,709
 632
 5,321
 15,662
Total revenue 228,559
 32,014
 39,836
 300,409
 192,553
 27,069
 29,688
 249,310
External customer expenses:                
Interest expense 23,744
 —
 880
 24,624
 15,506
 —
 589
 16,095
Noninterest expenses 117,288
 19,774
 21,334
 158,396
 109,265
 16,681
(r) 
13,771
 139,717
Provision for loan losses 6,097
 —
 804
 6,901
 7,675
 —
 187
 7,862
Total external customer expenses 147,129
 19,774
 23,018
 189,921
 132,446
 16,681
 14,547
 163,674
Inter-segment expenses:                
Interest expense 6,735
 4,843
 1,937
 13,515
 5,245
 1,973
 1,525
 8,743
Noninterest expenses 724
 1,944
 3,847
 6,515
 708
 2,186
 4,025
 6,919
Total inter-segment expenses 7,459
 6,787
 5,784
 20,030
 5,953
 4,159
 5,550
 15,662
Total expenses 154,588
 26,561
 28,802
 209,951
 138,399
 20,840
 20,097
 179,336
Income before taxes $73,971
 $5,453
 $11,034
 $90,458
 $54,154
 $6,229
 $9,591
 $69,974
Income tax provision       30,382
       24,004
Consolidated net income       $60,076
       $45,970
                 
Capital expenditures $6,611
 $103
 $480
 $7,194
 $14,346
 $672
 $19
 $15,037

(r) Noninterest income and noninterest expense for the period ended September 30, 2016 have been restated to correct an immaterial error related to revenue earned for cash servicing fees. See Note 1 - Basis of Presentation for further information.



The following table shows significant components of segment net assets as of SeptemberJune 30, 20172019 and December 31, 2016:2018:
  June 30, 2019 December 31, 2018
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total WSFS Bank 
Cash
Connect®
 
Wealth
Management
 Total
Statements of Financial Condition                
Cash and cash equivalents $167,173
 $345,971
 $8,681
 $521,825
 $115,147
 $491,863
 $13,747
 $620,757
Goodwill 453,513
 —
 20,199
 473,712
 145,808
 —
 20,199
 166,007
Other segment assets 10,938,718
 6,875
 215,465
 11,161,058
 6,225,820
 7,743
 228,543
 6,462,106
Total segment assets $11,559,404
 $352,846
 $244,345
 $12,156,595
 $6,486,775
 $499,606
 $262,489
 $7,248,870
Capital expenditures $5,240
 $71
 $130
 $5,441
 $4,779
 $375
 $344
 $5,498




  September 30, 2017 December 31, 2016
(Dollars in thousands) WSFS Bank 
Cash
Connect®
 Wealth
Management		 Total WSFS Bank 
Cash
Connect®
 
Wealth
Management
 Total
Statement of Financial Condition                
Cash and cash equivalents $94,169
 $631,883
 $7,313
 $733,365
 $100,893
 $717,643
 $3,387
 $821,923
Goodwill 145,808
 —
 20,199
 166,007
 147,396
 —
 20,143
 167,539
Other segment assets 5,757,941
 2,983
 215,048
 5,975,972
 5,545,611
 3,533
 226,664
 5,775,808
Total segment assets $5,997,918
 $634,866
 $242,560
 $6,875,344
 $5,793,900
 $721,176
 $250,194
 $6,765,270








13.17. INDEMNIFICATIONS AND GUARANTEES
Secondary Market Loan Sales
Given the current interest rate environment and our overall asset and liability management approach, we typically sell newly originated residential mortgage loans in the secondary market to mortgage loan aggregators and on a more limited basis, to government sponsored entities (GSEs) such as FHLMC, FNMA, and the FHLB. Loans held for sale are reflected on our unaudited Consolidated Statements of Financial Condition at fair value with changes in the value reflected in our unaudited Consolidated Statements of Income. Gains and losses are recognized at the time of sale. We periodically retain the servicing rights on residential mortgage loans sold which results in monthly service fee income. The mortgage servicing rights are included in our intangible assets in our unaudited Consolidated Statements of Financial Condition. Otherwise, we sell loans with servicing released on a nonrecourse basis. Rate-locked loan commitments that we intend to sell in the secondary market are accounted for as derivatives under ASC Topic 815, Derivatives and Hedging (ASC:(ASC 815).
We do not sell loans with recourse, except for standard loan sale contract provisions covering violations of representations and warranties and, under certain circumstances, early payment default by the borrower. These are customary repurchase provisions in the secondary market for residential mortgage loan sales. These provisions may include either an indemnification from loss or the repurchase of the loans. Repurchases and losses have been rare and no provision is made for losses at the time of sale. There were no such repurchaseswas one repurchase for $0.2 million during the ninesix months ended SeptemberJune 30, 2017.2019.
Swap Guarantees
We entered into agreements with threeseven unrelated financial institutions whereby those financial institutions entered into interest rate derivative contracts (interest rate swap transactions) with customers referred to them by us. Under the terms of the agreements, those financial institutions have recourse to us for any exposure created under each swap transaction in the event that the customer defaults on the swap agreement and the agreement is in a paying position to the third-party financial institution. This is a customary arrangement that allows us to provide access to interest rate swap transactions for our customers without creating the swap ourselves. These swap guarantees are accounted for as credit derivatives. 
At both SeptemberJune 30, 20172019 and December 31, 2016,2018, there were 134168 and 136 variable-rate to fixed-rate swap transactions between the third party financial institutions and our customers.customers, respectively. The initial notional aggregate amount was approximately $557.1$766.1 million at SeptemberJune 30, 20172019 compared to $518.8$581.5 million at December 31, 2016.2018. At SeptemberJune 30, 20172019, maturities ranged from under one1 year to ten15 years. The aggregate market value of these swaps to the customers was a liability of $8.6$25.1 million at SeptemberJune 30, 20172019 and $10.9a liability of $0.3 million at December 31, 2016.2018. At June 30, 2019, 146 swaps, with a liability of $26.1 million, were in paying positions to a third party. We had no reserves for thethese swap guarantees as of SeptemberJune 30, 2017.
2019.











14.18. CHANGE IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) INCOME
Accumulated other comprehensive income (loss) income includes unrealized gains and losses on available-for-sale investments, unrealized gains and losses on cash flow hedges, as well as unrecognized prior service costs, transition costs, and actuarial gains and losses on defined benefit pension plans. Changes to accumulated other comprehensive (loss) incomeloss are presented, net of tax, as a component of stockholders'stockholders’ equity. Amounts that are reclassified out of accumulated other comprehensive (loss) incomeloss are recorded on the unaudited Consolidated Statement of Income either as a gain or loss.
Changes to accumulated other comprehensive (loss) incomeloss by component are shown, net of taxes, in the following tables for the period indicated:
(Dollars in thousands) 
Net change in
investment
securities
available for sale
 
Net change
in investment securities
held to
maturity
 
Net
change in
defined
benefit
plan
 
Net change in
fair value of
derivatives
used for cash
flow hedges
 Total
Balance, March 31, 2019 $2,701
 $686
 $693
 $(1,824) $2,256
Other comprehensive income before reclassifications 19,591
 —
 10
 1,007
 20,608
Less: Amounts reclassified from accumulated other comprehensive (loss) income (48) (84) (44) —
 (176)
Net current-period other comprehensive income (loss) 19,543
 (84) (34) 1,007
 20,432
Balance, June 30, 2019 $22,244
 $602
 $659
 $(817) $22,688
           
           
Balance, March 31, 2018 $(19,685) $1,104
 $924
 $(3,163) $(20,820)
Other comprehensive income (loss) before reclassifications (4,501) —
 8
 (245) (4,738)
Less: Amounts reclassified from accumulated other comprehensive income (loss) —
 (117) (38) —
 (155)
Net current-period other comprehensive (loss) income (4,501) (117) (30) (245) (4,893)
Balance, June 30, 2018 $(24,186) $987
 $894
 $(3,408) $(25,713)

(Dollars in thousands) 
Net change in
investment
securities
available for sale
 
Net change
in securities
held to
maturity
 
Net
change in
defined
benefit
plan
 
Net change in
fair value of
derivative
used for cash
flow hedge
 Total
Balance, June 30, 2017 $(4,342) $1,194
 $912
 $(1,622) $(3,858)
Other comprehensive income before reclassifications 1,289
 —
 —
 42
 1,331
Less: Amounts reclassified from accumulated other comprehensive (loss) income (475) (99) (22) —
 (596)
Net current-period other comprehensive income (loss) 814
 (99) (22) 42
 735
Balance, September 30, 2017 $(3,528) $1,095
 $890
 $(1,580) $(3,123)
Balance, June 30, 2016 $12,841
 $1,592
 $1,244
 $—
 $15,677
Other comprehensive (loss) income before reclassifications (1,112) —
 —
 61
 (1,051)
Less: Amounts reclassified from accumulated other comprehensive income (645) (102) (20) —
 (767)
Net current-period other comprehensive (loss) income (1,757) (102) (20) 61
 (1,818)
Balance, September 30, 2016 $11,084
 $1,490
 $1,224
 $61
 $13,859
           
Balance, December 31, 2016 $(8,194) $1,392
 $957
 $(1,772) $(7,617)
Other comprehensive income before reclassifications 5,802
 —
 —
 192
 5,994
Less: Amounts reclassified from accumulated other comprehensive (loss) income (1,136) (297) (67) —
 (1,500)
Net current-period other comprehensive income (loss) 4,666
 (297) (67) 192
 4,494
Balance, September 30, 2017 $(3,528) $1,095
 $890
 $(1,580) $(3,123)
Balance, December 31, 2015 $(1,887) $1,795
 $788
 $—
 $696
Other comprehensive income before reclassifications 14,143
 —
 —
 61
 14,204
Less: Amounts reclassified from accumulated other comprehensive (loss) income (1,172) (305) 436
 —
 (1,041)
Net current-period other comprehensive income (loss) 12,971
 (305) 436
 61
 13,163
Balance, September 30, 2016 $11,084
 $1,490
 $1,224
 $61
 $13,859

(Dollars in thousands) 
Net change in
investment
securities
available for sale
 
Net change
in investment securities
held to
maturity
 
Net
change in
defined
benefit
plan
 
Net change in
fair value of
derivatives
used for cash
flow hedges
 Total
Balance, December 31, 2018 $(14,553) $779
 $834
 $(2,454) $(15,394)
Other comprehensive income (loss) before reclassifications 36,856
 (2) (89) 1,637
 38,402
Less: Amounts reclassified from accumulated other comprehensive (loss) income (59) (175) (86) —
 (320)
Net current-period other comprehensive income (loss) 36,797
 (177) (175) 1,637
 38,082
Balance, June 30, 2019 $22,244
 $602
 $659
 $(817) $22,688
           
           
Balance, December 31, 2017 $(7,842) $1,223
 $865
 $(2,398) $(8,152)
Other comprehensive income (loss) before reclassifications (16,328) —
 8
 (1,010) (17,330)
Less: Amounts reclassified from accumulated other comprehensive income (loss) (16) (236) 21
 —
 (231)
Net current-period other comprehensive (loss) income (16,344) (236) 29
 (1,010) (17,561)
Balance, June 30, 2018 $(24,186) $987
 $894
 $(3,408) $(25,713)



The unaudited Consolidated Statements of Income were impacted by components of other comprehensive income (loss) as shown in the table below:
  Three Months Ended June 30, Affected line item in unaudited Consolidated Statements of Income
(Dollars in thousands) 2019 2018 
Securities available for sale:      
Realized gains on securities transactions $(63) $—
 Securities gains, net
Income taxes 15
 —
 Income tax provision
Net of tax $(48) $—
  
Net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity:      
Amortization of net unrealized gains to income during the period $(111) $(153) Interest and dividends on investment securities
Income taxes 27
 36
 Income tax provision
Net of tax $(84) $(117)  
Amortization of Defined Benefit Pension items:      
Prior service costs (credits) (1)
 $(19) $(19)  
Actuarial gains (16) (12)  
Total before tax $(35) $(31) Salaries, benefits and other compensation
Income taxes (9) (7) Income tax provision
Net of tax (44) (38)  
Total reclassifications $(176) $(155)  

 Six Months Ended June 30, Affected line item in unaudited Consolidated Statements of Income
(Dollars in thousands) Three Months Ended September 30, Affected line item in Consolidated Statements of Income 2019 2018 
 2017 2016 
Securities available for sale:          
Realized gains on securities transactions $(736) $(1,040) Security gains, net $(78) $(21) Securities gains, net
Income taxes 261
 395
 Income tax provision 19
 5
 Income tax provision
Net of tax $(475) $(645)  $(59) $(16) 
Net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity:          
Amortization of net unrealized gains to income during the period $(159) $(162) Interest income on investment securities $(231) $(309) Interest and dividends on investment securities
Income taxes 60
 60
 Income tax provision 56
 73
 Income tax provision
Net of tax $(99) $(102)  $(175) $(236) 
Amortization of Defined Benefit Pension items:          
Prior service (credits) costs $(19) $(18) 
Actuarial (gains) losses (18) (16) 
Prior service costs (credits) (1)
 $(38) $40
 
Transition obligation —
 —
 
Actuarial gains (31) (23) 
Total before tax $(37) $(34) Salaries, benefits and other compensation $(69) $17
 Salaries, benefits and other compensation
Income taxes 15
 14
 Income tax provision (17) 4
 Income tax provision
Net of tax (22) (20)  (86) 21
 
Total reclassifications $(596) $(767)  $(320) $(231) 
(Dollars in thousands) Nine Months Ended September 30, Affected line item in Consolidated Statements of Income
  2017 2016 
Securities available for sale:      
Realized gains on securities transactions $(1,764) $(1,890) Security gains, net
Income taxes 628
 718
 Income tax provision
Net of tax $(1,136) $(1,172)  
Net unrealized holding gains on securities transferred between available-for-sale and held-to-maturity:      
Amortization of net unrealized gains to income during the period $(478) $(492) Interest income on investment securities
Income taxes 181
 187
 Income tax provision
Net of tax $(297) $(305)  
Amortization of Defined Benefit Pension items:      
Prior service (credits) costs $(57) $(44)  
Actuarial (gains) losses (52) 746
  
Total before tax $(109) $702
 Salaries, benefits and other compensation
Income taxes 42
 (266) Income tax provision
Net of tax (67) 436
  
Total reclassifications $(1,500) $(1,041)  
(1)
Prior service costs balance for the six months ended June 30, 2018 includes a tax true-up adjustment of $0.1 million from March 31, 2018. Note that the tax true-up was made to the deferred tax asset with an offset to AOCI and does not affect the actual net periodic benefit costs of the pension plan.


15.19. RELATED PARTY TRANSACTIONS
In the ordinary course of business, from time to time we enter into transactions with related parties, including, but not limited to, our officers and directors. These transactions are made on substantially the same terms and conditions, including interest rates and collateral requirements, as those prevailing at the same time for comparable transactions with other customers. They do not, in the opinion of management, involve greater than normal credit risk or include other features unfavorable features.to us. Any related party loans exceeding $0.5 million require review and approval by the Board of Directors. During the second quarter of 2019, there were no loans to related parties exceeding $0.5 million.
The outstanding balances of loans to related parties at SeptemberJune 30, 20172019 and December 31, 20162018 were $1.1$1.0 million and $1.3$1.2 million, respectively. Total deposits from related parties at SeptemberJune 30, 20172019 and December 31, 20162018 were $6.6$8.3 million and $3.6$5.4 million, respectively. During the thirdsecond quarter of 2017, new loans and credit line advances to related parties and repayments were each less than $0.1 million. For the nine months ended September 30, 2017,2019, new loans and credit line advances to related parties were $0.4less than $0.1 million and repayments were $0.6$0.3 million.

16.20. LEGAL AND OTHER PROCEEDINGS
In accordance with the current accounting standards for loss contingencies, we establish reserves for litigation-related matters that arise in the ordinary course of our business activities when it is probable that a loss associated with a claim or proceeding has been incurred and the amount of the loss can be reasonably estimated. Litigation claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. In addition, our defense of litigation claims may result in legal fees, which we expense as incurred.
As previously disclosed, on February 27, 2018, we entered into a settlement agreement with Universitas Education, LLC (Universitas) to resolve arbitration claims related to services provided by Christiana Bank and Trust Company (CB&T) prior to its acquisition by WSFS in December 2010. In accordance with the current accounting standards for loss contingencies,litigation settlement, we establish reserves for litigation-related matterspaid Universitas $12.0 million to fully settle the claims. During the third quarter of 2018, WSFS recovered $7.9 million in settlement and legal costs from insurance carriers that ariseprovided coverage relating to the Universitas matter. WSFS is pursuing all of its rights and remedies to recover the remaining amounts relating to the Universitas proceeding, including the Universitas settlement payment, legal fees and related costs, by enforcing the indemnity right in the ordinary course2010 purchase agreement by which WSFS acquired CB&T.
In March 2017, Nature’s Healing Trust (NHT) filed a complaint against WSFS Bank in the Delaware Court of our business activities when it is probableChancery. NHT asserts that a loss associated with a claim or proceeding has been incurred andWSFS Bank failed to provide timely notice concerning the possible lapse of two life settlement policies (aggregate face amount of $6.3 million) held in the loss can be reasonably estimated. Litigationtrust. NHT asserts claims and proceedings of all types are subject to many uncertain factors that generally cannot be predicted with assurance. In addition, our defense of litigation claims may result in legal fees, which we expense as incurred.
On April 7, 2015,against WSFS Bank received a noticefor breach of arbitrationcontract, breach of fiduciary duty, and statement of claim (the Claim) from Universitas Education, LLC (Universitas) relating to Christiana Trust acting as “insurance trustee”negligence, and seeks the face value of the Charter Oak Trust Welfare Benefit Plan (the Trust). The actions underlyingpolicies. WSFS Bank disputes the Claim occurred duringfactual allegations and denies liability. WSFS Bank has, in accordance with its normal procedures, notified its insurance carriers of a period prior to WSFS’ acquisition of Christiana Trust. According to the allegations contained in the Claim, certain life insurance policy benefits paid to an individual claiming/purporting to be a trustee of the Trust were misappropriated by individuals associated with the plan sponsor. None of those individuals, however, were employed by or agents of Christiana Trust orpossible claim. WSFS Bank. It is alleged that Christiana Trust, as insurance trustee, owed a fiduciary duty to the beneficiaries of the Trust and that it breached its fiduciary duty, was negligent, and aided and abetted fraud and theft in connection with the misappropriation of funds. It is further alleged that Universitas was the rightful beneficiary under the Trust of the misappropriated funds, and thus was harmed because it did not receive the death benefits that had been paid over to the purported trustee of the Trust. While the face amounts of the two insurance policies in question total $30 million, Universitas revised its total Claim to assert an alleged loss of approximately $27 million plus costs and interest to date of $27 million. WSFSBank is vigorously defending itself against the Claimin this matter and believes that it has valid factual and legal defensesdefenses. The case is currently scheduled to the Claim. The evidentiary hearing concluded late in the third quarter of 2017 and post-trial briefing will conclude in late November 2017. It is anticipated that a decision in the arbitration will be renderedgo to trial during the fourth quarter of 2017 or the first quarter of 2018. WSFS does not believe that the ultimate resolution of the Claim will have a material adverse effect on the Company, but there can be no assurance as to the ultimate outcome.2019.
There were no material changes or additions to other significant pending legal or other proceedings involving us other than those arising out of routine operations.


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
WSFS Financial Corporation (the Company or WSFS) is a savings and loan holding company headquartered in Wilmington, Delaware. Substantially all of our assets are held by our subsidiary, Wilmington Savings Fund Society, FSB (WSFS Bank or the Bank), one of the ten oldest bank and trust companies continuously operating under the same name in the United States (U.S.). At $6.88$12.2 billion in assets and $18.07$19.7 billion in assets under management (AUM) and assets under administration (AUA), WSFS Bank is also the largest bank and trust company headquartered in the Delaware Valley. As a federal savings bank, which was formerly chartered as a state mutual savings bank, the Bank enjoys a broader fiduciary powersscope of permissible activities than most other types of financial institutions. A fixture in the community, we have been in operation for more than 185187 years. In addition to our focus on stellar customer service, we have continued to fuel growth and remain a leader in our community. We are a relationship-focused, locally-managed, community banking institution. We state ourOur mission simply:is simple: “We Stand for Service.” Our strategy of “Engaged Associates, delivering Stellar Experiences growing Customer Advocates and valueliving our culture, making a better life for our Owners”all we serve” focuses on exceeding customer expectations, delivering stellar experiences and building customer advocacy through highly-trained, relationship-oriented, friendly, knowledgeable and empowered Associates.
We have five consolidated subsidiaries: WSFS Bank, WSFS Wealth Management, LLC (Powdermill), WSFS Capital Management, LLC (West Capital), Cypress Capital Management, LLC (Cypress) and Christiana Trust Company of Delaware (Christiana Trust DE). We also have one unconsolidated subsidiary, WSFS Capital Trust III. WSFS Bank has three wholly-ownedfour wholly owned subsidiaries: Beneficial Equipment Finance Corporation (BEFC), WSFS Investment Group, Inc. (WSFS Wealth Investments,Investments), 1832 Holdings, Inc., and Monarch EntityWSFS SPE Services, LLC.LLC, and one majority-owned subsidiary, NewLane Finance Company.
Our core banking business is commercial lending funded by customer-generated deposits. We have built a $3.92$6.4 billion commercial loan portfolio by recruiting the best seasoned commercial lenders in our markets, and offering the high level of service and flexibility typically associated with a community bank.bank, and through acquisition. We fund this business primarily with deposits generated through commercial relationships and retail deposits. As of SeptemberJune 30, 2017,2019, we service our customers primarily from our 77147 offices located in Pennsylvania (72), Delaware (46)(49), Pennsylvania (29)New Jersey, (24), Virginia (1) and Nevada (1) and through our website at www.wsfsbank.com. We also offer a broad variety of consumer loan products, retail securities and insurance brokerage through our retail branches, and mortgage and title services through our branches and Pennsylvania-based WSFS Mortgage. WSFS Mortgage is a mortgage banking company specializing in a variety of residential mortgage and refinancing solutions.
TheOur leasing business is conducted by NewLane Finance Company (formerly Neumann Finance Company) and BEFC. NewLane Finance Company originates small business leases and provides financing products and services to businesses nationwide, targeting various equipment categories including technology, software, office, medical and other areas. BEFC originates small business leases, primarily medical and veterinary equipment. During the second quarter of 2019, WSFS Bank announced its intention to combine the operations of NewLane Finance Company and BEFC later in 2019.
Our Cash Connect® segment is a premier U.S. provider of ATM vault cash, smart safe and other cash logistics services in the U.S. Cash Connect® manages $890.3 millionover $1.3 billion in total cash and services over 22,000approximately 26,300 non-bank ATMs and over 1,200approximately 2,700 smart safes nationwide. Cash Connect® provides related services such as online reporting and ATM cash management, predictive cash ordering, armored carrier management, ATM processing equipment sales and deposit safe cash logistics. Cash Connect® also operates over 440442 ATMs for the Bank, which has one of the largest branded ATM networknetworks in Delaware.our market.
As a provider of ATM vault cash to the U.S. ATM industry, Cash Connect® is exposed to substantial operational risk, including theft of cash from ATMs, armored vehicles, or armored carrier terminals, as well as general risk of accounting errors or fraud. This risk is managed through a series of financial controls, automated tracking and settlement systems, contracts, and other risk mitigation strategies, including both loss prevention and loss recovery strategies. Throughout its 1719 year history, Cash Connect® periodically has been exposed to losses through theft from armored courier companies and consistently has been able to recover losses through its risk management strategies.
The
Our Wealth Management segment provides a broad array of fiduciary,planning and advisory services, investment management, trust services, and credit and deposit products to individual, corporate, and institutional clients through sixmultiple integrated businesses.  Combined, these businesses had $19.7 billion of assets under management (AUM) and assets under administration (AUA) at June 30, 2019. WSFS Wealth Investments provides financial advisory services along with $177.2 million in AUM, provides insurance and brokerage products primarily to our retail banking clients.products. Cypress, a registered investment adviser, with approximately $860.2 million in AUM (includes $122.9 million of Christiana Trust assets for which Cypress serves as sub-adviser), is a fee-only wealth management firm offeringmanaging a “balanced” investment style portfolio focused on preservation of capital and providinggenerating current income whose primary market segment is high-net-worth individuals.income. West Capital, a registered investment adviser, with approximately $839.6 million in AUM, is a fee-only wealth management firm which operatesoperating under a multi-family office philosophy and provides fullyto provide customized solutions tailored to the unique needs of institutions and high-net-worth individuals. Christiana Trust, with $16.31 billion in AUM and assets under administration (includes $122.9 millionThe institutional trust division of Christiana Trust assets for which Cypress servesWSFS (doing business as sub-adviser),WSFS Institutional Services) provides fiduciary and investment services to personal trust clients; and trustee, agency, bankruptcy administration, custodial and commercial domicile services to institutional and corporate clients. The personal trust division of WSFS (doing business as Christiana Trust) provides personal trust and institutional clients.fiduciary services to families and individuals across the U.S. Powdermill is a multi-family office that specializesspecializing in providing unique, independent solutions to high-net-worth individuals, families and corporate executives through a coordinated, centralized approach. WSFS Private BankingWealth Client Management serves high-net-worth clients by delivering credit and deposit products and partnering with other businessWealth Management units to deliver investment management and fiduciary products and services.

provide comprehensive solutions to clients.
As a provider of trust services to our clients, we are exposed to operational, reputation-related and legal risks due to the inherent complexity of the trust business. To mitigate these risks, we rely on the hiring, development and retention of experienced Associates, financial controls, managerial oversight, and other risk management practices. Also, from time to time our trust business may give rise to disputes with clients and we may be exposed to litigation which could result in significant costs. The ultimate outcome of any litigation is uncertain.


2019 Developments
On March 1, 2019, we acquired Beneficial Bancorp, Inc. (Beneficial), including its subsidiary Beneficial Bank. Subject to the terms and conditions of the Merger Agreement, stockholders of Beneficial received 0.3013 shares of WSFS common stock and $2.93 in cash for each share of Beneficial common stock. See Note 3 to the unaudited Consolidated Financial Statements for further information.
During the second quarter, we completed the sale of five Beneficial Bank retail banking offices in New Jersey, with approximately $177.9 million in deposits to The Bank of Princeton, a New Jersey-based financial institution, at a deposit premium of 7.37%. The sale was part of a previously announced branch optimization plan to consolidate and divest 30 retail banking offices, or 25%, of the combined WSFS and Beneficial branch network. Most of the consolidations will be completed during the conversion and rebranding of the remaining Beneficial banking offices, which is expected to occur in the third quarter of 2019.


FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
Financial Condition
Our totalTotal assets increased $110.1 million, or 2%,$4.9 billion to $6.88$12.2 billion at SeptemberJune 30, 20172019 compared to December 31, 2016.2018. Net loans, excluding loans held for sale, increased $225.8$3.7 billion which includes $3.7 billion of loans acquired from Beneficial. Excluding loans acquired from Beneficial, loans decreased $17.6 million, or 5%reflecting declines of $107.9 million in commercial real estate loans and $48.5 million in residential mortgages, partially offset by increases of $84.5 million in Commercial and Industrial (C&I loans) (including owner-occupied), $22.6 million in consumer loans, $15.5 million in commercial small business leases, and $16.1 million in construction loans. Investment securities increased $585.2 million during the six months ended June 30, 2019, primarily the result of our ongoing balance sheet optimization related to our acquisition of Beneficial. Goodwill and intangible assets increased $389.7 million during the six months ended June 30, 2019, due to our acquisition of Beneficial. Other assets increased $191.5 million during the six months ended June 30, 2019, primarily due to growtha $172.5 million right-of-use asset recorded under ASU 2016-02, Leases. Additionally, Bank Owned Life Insurance (BOLI) increased $23.4 million during the six months ended June 30, 2019, primarily reflecting the value of retained split-dollar BOLI policies acquired from Beneficial. Further, other investments increased $11.5 million during the six months ended June 30, 2019, primarily due to unrealized gains of $4.8 million on our Visa Class B shares and our investment in the commercial and industrial (C&I), construction and consumer loan portionsSpring EQ, in addition to equity investments acquired from Beneficial. These increases were partially offset by a decrease of our loan portfolio. Available-for-sale investment securities increased $15.9$98.9 million or 2% as part of our balance sheet management strategy. Partially offsetting these increases,in cash and cash equivalents, decreased by $88.6reflecting a decline of $146.6 million or 11%, due primarily to the redemption of $55.0 million of our 6.25% senior notes due 2019, which were issued in 2012 (the 2012 senior notes) as well asfrom improved cash optimization at Cash Connect® resulting, and $47.0 million of cash from Beneficial. For further information, see the Notes to the unaudited Consolidated Financial Statements.
Total liabilities increased $3.9 billion to $10.3 billion during the six months ended June 30, 2019. Customer funding increased $3.8 billion during the six months ended June 30, 2019, which includes $3.7 billion of customer funding acquired from Beneficial. Excluding the customer funding acquired from Beneficial, customer deposits increased $159.8 million, reflecting increases of $80.1 million in lower cash balancesmoney market accounts and $60.1 million in non-owned ATMs. Loans held for salecustomer time deposits, partially offset by a decrease of $47.4 million in savings deposits. In addition, other liabilities increased $217.5 million during the six months ended June 30, 2019, primarily due to a $186.2 million lease liability recorded under ASU 2016-02, Leases. Partially offsetting these increases was brokered deposits, which decreased $35.5$84.4 million, excluding $209.8 million in brokered deposits acquired from Beneficial. FHLB advances decreased $212.8 million, or 65%, consistent with our strategy to sell most newly originated residential mortgages in the secondary market.
Total liabilities increased $56.5 million, or less than 1%, to $6.13 billion during the nine months ended September 30, 2017. Deposits increased $313.3 million, or 7%, including an increase of $278.2 million in customer funding and an increase of $35.1 million in brokered deposits. The increase in customer funding was mainly due to an increase of $314.2 million in core deposits. This increase includes a seasonal increase in public funding balance core deposit balances of $155.7 million as well as other organic core deposit growth of $158.5 million, partially offset a decline in CDs of $36.1 million. Growth in deposits was partially offset by FHLB advances, which decreased $156.4 million, or 18%, and lower federal funds purchased and securities sold under agreement to repurchase, which decreased $60.0$43.0 million or 46%,during the six months ended June 30, 2019, both a result of the increase in deposits. Senior debt decreased $53.9 million or 35%, primarily due to the redemptionour ongoing balance sheet optimization related to our acquisition of the 2012 senior notes, net of the associated write-off of unamortized debt issuance costs, as part of our continued net interest margin management strategy.Beneficial.
Capital Resources
Senior Debt: On September 1, 2017, WSFS redeemed $55.0 million in aggregate principal amount of the 2012 senior notes. We recorded noninterest expense of $0.7 million due to the write-off of unamortized debt issuance costs in connection with this redemption.
Share Repurchases: During the second quarter of 2016, WSFS issued $100.0 million in aggregate principal amount of 4.50% fixed-to-floating rate senior notes duesix months ended June 15, 2026 (the 2016 senior notes). The Company is using the net proceeds from the offering for general corporate purposes. See Note 1 to the Consolidated Financial Statements for further information.
Share Repurchases: During the third quarter of 2017,30, 2019, WSFS repurchased 71,000271,340 shares of common stock at an average price of $44.78$41.72 per share following the closing of the Beneficial acquisition as part of our 5% share buyback program approved by the Board of Directors duringin the fourth quarter of 2015.2018. WSFS has 750,1942,865,638 shares, or slightly more than 2%5% of outstanding shares, remaining to repurchase under this authorization. As capital levels subsequent to our acquisition of Beneficial are stronger than anticipated, we will continue to execute on the Board approved share buyback plan including increased opportunistic share repurchase above our stated practice of returning a minimum of 25% of annual net income to stockholders through dividends and share repurchases, based on current valuation levels.
In the first quarter of 2019, we repurchased $5.8 million of common stock in connection with the settlement of outstanding stock based compensation awards held by Beneficial Associates at closing.
Stockholders’ equity increased $53.5 million$1.0 billion between December 31, 20162018 and SeptemberJune 30, 2017.2019. This increase was primarily due to netour acquisition of Beneficial, but also reflects $48.9 million of income forattributable to WSFS and $36.8 million from the nine months ended September 30, 2017effect of $60.1 million, improvement in the fair value of ourmarket-value changes on available-for-sale securities, portfolio of $5.8 million (after-tax) and an increase of $4.8 million related to the issuance of stock based compensation and stock option expense. These were partially offset by year-to-date stock buybacks of $9.2 million and the payment of the common stock dividends of $6.6 million.$9.9 million and $17.1 million for share repurchases, described above, for the six months ended June 30, 2019.


The table below compares the Bank's and the Company’s consolidated capital position to the minimum regulatory requirements as of SeptemberJune 30, 2017:2019:
 
 
Consolidated
Capital
 
For Capital
Adequacy Purposes
 
To be Well-Capitalized
Under Prompt Corrective
Action Provisions
 
Consolidated
Capital
 
For Capital
Adequacy Purposes
 
To be Well-Capitalized
Under Prompt Corrective
Action Provisions
(Dollars in thousands) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Total Capital (to Risk-Weighted Assets)                        
Wilmington Savings Fund Society, FSB $716,943
 12.22% $469,233
 8.00% $586,542
 10.00% $1,311,045
 12.93% $811,192
 8.00% $1,013,990
 10.00%
WSFS Financial Corporation 672,476
 11.43% 470,701
 8.00% 588,376
 10.00% 1,375,538
 13.55% 811,905
 8.00% 1,014,881
 10.00%
Tier 1 Capital (to Risk-Weighted Assets)                        
Wilmington Savings Fund Society, FSB 675,623
 11.52% 351,925
 6.00% 469,233
 8.00% 1,264,110
 12.47% 608,394
 6.00% 811,192
 8.00%
WSFS Financial Corporation 631,157
 10.73% 353,026
 6.00% 470,701
 8.00% 1,328,603
 13.09% 608,929
 6.00% 811,905
 8.00%
Common Equity Tier 1 Capital (to Risk-Weighted Assets)                        
Wilmington Savings Fund Society, FSB 675,623
 11.52% 263,944
 4.50% 381,252
 6.50% 1,264,110
 12.47% 456,295
 4.50% 659,093
 6.50%
WSFS Financial Corporation 566,220
 9.62% 264,769
 4.50% 382,444
 6.50% 1,263,603
 12.45% 456,697
 4.50% 659,673
 6.50%
Tier 1 Leverage Capital                        
Wilmington Savings Fund Society, FSB 675,623
 10.24% 263,794
 4.00% 329,742
 5.00% 1,264,110
 10.95% 461,793
 4.00% 577,241
 5.00%
WSFS Financial Corporation 631,157
 9.54% 264,796
 4.00% 330,996
 5.00% 1,328,603
 11.49% 462,668
 4.00% 578,335
 5.00%
Book value per share of common stock was $23.59$34.50 at SeptemberJune 30, 2017,2019, an increase of $1.69,$8.33, or 8%32% from $21.90$26.17 at December 31, 2016.2018. Tangible book value per share of common stock (a non-GAAP financial measure) was $17.57$23.69 at SeptemberJune 30, 2017,2019, an increase of $1.77,$3.45, or 11%17%, from $15.80$20.24 at December 31, 2016.2018.  We believe tangible common book value per share helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets. This non-GAAP data should be considered in addition to results prepared in accordance with GAAP,Generally Accepted Accounting Principles in the U.S. (GAAP), and is not a substitute for, or superior to, GAAP results. For a reconciliation of tangible common book value per share to book value per share in accordance with GAAP, see "Reconciliation of Non-GAAP Measure to GAAP Measure".Measure."
Regulators have established five capital tiers: well-capitalized, adequately-capitalized, under-capitalized, significantly under-capitalized, and critically under-capitalized. A depository institution’s capital tier depends on its capital levels in relation to various relevant capital measures, which include leveraged and risk-based capital measures and certain other factors. Depository institutions that are not classified as well-capitalized are subject to various restrictions regarding capital distributions, payment of management fees, acceptance of brokered deposits and other operating activities.
Regulatory capital requirements for the Bank and the Company include a minimum common equity Tier 1 capital ratio of 4.50% of risk-weighted assets, a Tier 1 capital ratio of 6.00% of risk-weighted assets, a minimum Total capital ratio of 8.00% of risk-weighted assets and a minimum Tier 1 leverage capital ratio of 4.00% of average assets.
Not included in the Bank’s capital, the Company separately held $32.5$173.1 million in cash to support share repurchases, potential dividends, acquisitions, strategic growth plans and other general corporate purposes.
As shown in the table above, as of SeptemberJune 30, 2017,2019, the Bank and the Company were in compliance with regulatory capital requirements and exceeded the amounts required to be considered “well capitalized”“well-capitalized” as defined in the regulations.

Liquidity
We manage our liquidity and funding needs through our Treasury function and our Asset/Liability Committee. We have a policy that separately addresses liquidity, and management monitors our adherence to policy limits. Also, liquidity risk management is a primary area of examination by the banking regulators.
We have ready access to several funding sources to fund growth and meet our liquidity needs.  Among these are cash from operations, retail deposit programs, loan repayments, FHLB borrowings, repurchase agreements, access to the Federal Discount Window, and access to the brokered deposit market as well as other wholesale funding avenues. In addition, we have a large portfolio of high-quality, liquid investments, primarily short-duration mortgage-backed securities, that provide a near-continuous source of cash flow to meet current cash needs, or can be sold to meet larger discrete needs for cash. We believe these sources are sufficient to meet our funding needs as well as maintain required and prudent levels of liquidity over the next twelve months.
During the ninesix months ended SeptemberJune 30, 2017,2019, cash and cash equivalents decreased $88.6$98.9 million to $733.4$521.8 million from $821.9$620.8 million as of December 31, 2016.2018. Cash provided by operating activities was $107.8$92.2 million, primarily reflecting the cash impact of earnings and sale ofoffset by a $36.0 million increase in net lending activity for loans held for sale during the ninesix months ended SeptemberJune 30, 2017.2019. Cash usedprovided by investing activities was $230.9$218.9 million, primarily due to increased lendingwhich included proceeds of $232.0$602.4 million $5.7from sales of securities (including $578.8 million from sales of net investmentsecurities acquired from Beneficial), $76.1 million in premises and equipment, and $4.1 million of net cash paid for available-for-sale securities, partially offset by $5.0acquired from Beneficial, $59.7 million received from the surrender of the majority of BOLI policies acquired from Beneficial and $26.6 million from net redemptions of FHLB stockstock. The cash provided by investing activities was partially offset by $529.6 million in net purchases of investment securities as part of our balance sheet optimization and $4.4$20.6 million received from sales of other real estate owned (OREO) properties.additional lending activity. Cash provided byused for financing activities was $34.5$410.1 million, primarily due to a $319.8 million net increase in deposits, partially offset by $156.4$212.8 million used to repay FHLB advances, $60.0a $131.3 million from repayments onnet decrease in deposits, $43.0 million for repayment of federal funds purchased, and securities sold under agreement to repurchase, $55.0 million from the redemption of our 2012 senior debt, $9.2$17.1 million for repurchaserepurchases of common stock, and cash paidwhich includes $5.8 million of common stock repurchased in connection with the settlement of outstanding stock based compensation awards held by Beneficial Associates at closing. See Note 3 to the unaudited Consolidated Financial Statements for dividends of $6.6 million.

further information.
NONPERFORMING ASSETS
Nonperforming assets include nonaccruing loans, OREO and restructured loans. Nonaccruing loans are those on which we no longer accrue interest. Loans are placed on nonaccrual status immediately if, in the opinion of management, collection is doubtful, or when principal or interest is past due 90 days or more and the value of the collateral is insufficient to cover principal and interest. Interest accrued but not collected at the date a loan is placed on nonaccrual status is reversed and charged against interest income. In addition, the amortization of net deferred loan fees is suspended when a loan is placed on nonaccrual status. Subsequent cash receipts are applied either to the outstanding principal balance or recorded as interest income, depending on management’s assessment of the ultimate collectability of principal and interest. Past due loans are defined as loans contractually past due 90 days or more as to principal or interest payments but which remain in accrual status because they are considered well secured and in the process of collection.

The following table shows our nonperforming assets and past due loans at the dates indicated:
(Dollars in thousands) September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
Nonaccruing loans:        
Commercial $12,705
 $2,015
Commercial and industrial $21,041
 $14,056
Owner-occupied commercial 3,346
 2,078
 8,753
 4,406
Commercial mortgages 8,803
 9,821
 2,302
 3,951
Construction 1,839
 —
 —
 2,781
Residential mortgages 4,733
 4,967
 3,887
 2,854
Consumer 2,110
 3,995
 1,653
 2,006
Total nonaccruing loans 33,536
 22,876
 37,636
 30,054
Other real estate owned 3,924
 3,591
 3,703
 2,668
Restructured loans (1)
 14,905
 14,336
 14,203
 14,953
Total nonperforming assets $52,365
 $40,803
 $55,542
 $47,675
Past due loans: (1)
        
Commercial $685
 $—
 $1,165
 $71
Residential mortgages $557
 $153
 115
 660
Consumer 96
 285
Consumer (2)
 14,387
 104
Total past due loans $1,338
 $438
 $15,667
 $835
Ratio of allowance for loan losses to total gross loans (2)(3)
 0.86% 0.89% 0.53% 0.81%
Ratio of nonaccruing loans to total gross loans (2)
 0.71
 0.51
Ratio of allowance for loan losses to total gross loans (excluding acquired loans) 0.99
 0.89
Ratio of nonaccruing loans to total gross loans (3)
 0.44
 0.62
Ratio of nonperforming assets to total assets 0.76
 0.60
 0.46
 0.66
Ratio of loan loss allowance to nonaccruing loans 119.87
 173.77
Ratio of loan loss allowance to total nonperforming assets 0.77
 0.97
Ratio of allowance for loan losses to nonaccruing loans 121
 132
Ratio of allowance for loan losses to total nonperforming assets(4)
 82
 83
(1) 
Accruing loans only, which includes acquired nonimpaired loans. Nonaccruing Troubled Debt Restructurings (TDRs) are included in their respective categories of nonaccruing loans.
(2) 
Includes U.S. government guaranteed student loans with little risk of credit loss
(3)
Total loans exclude loans held for sale and reverse mortgages.
(4)
Excludes acquired impaired loans.
Nonperforming assets increased $11.6$7.9 million between December 31, 20162018 and SeptemberJune 30, 2017. As2019. This increase included a result,$7.6 million increase in nonaccruing loans, primarily due to one $20.2 million C&I relationship that was moved to nonperforming status during the quarter, partially offset by two legacy WSFS C&I loans, previously classified as nonperforming, that experienced significant credit events in the quarter, which resulted in higher levels of provision for loan losses and concurrent charge-offs during the quarter. Restructured loans at June 30, 2019 were essentially flat as compared to December 31, 2018. The ratio of nonperforming assets to total assets increased to 0.76% at September 30, 2017improved from 0.60%0.66% at December 31, 2016. The increase was2018 to 0.46% at June 30, 2019, primarily due to one locally-based, commercial and industrial participation that was downgraded during the first quarter of 2017 after a targeted energy sector review which has a currentlarger combined balance of $9.0 million. The loan relationship has been, and continues to be, paying current, and positive resolution is expected. A comprehensive impairment analysis was completed and the results are included in the provision for loan losses for the nine months ended September 30, 2017. Owner-occupied commercial and construction nonaccruing loans increased as several smaller relationships migrated to nonaccruing. Commercial mortgage nonaccruing loans declined $1.0 million and consumer nonaccruing loans declined $1.9 million due to the repayment of one long-term problem loan of $1.3 million as well as several loans which returned to accrual status.sheet.
The following table summarizes the changes in nonperforming assets during the periods indicated:
 Nine months ended Nine months ended Six Months Ended June 30,
(Dollars in thousands) September 30, 2017 September 30, 2016 2019 2018
Beginning balance $40,803
 $39,892
 $47,675
 $59,000
Additions 37,028
 32,918
 40,142
 11,563
Collections (14,890) (23,950) (16,637) (9,069)
Transfers to accrual (2,694) (681) (1,120) (9)
Charge-offs (7,882) (7,593) (14,518) (6,346)
Ending balance $52,365
 $40,586
 $55,542
 $55,139
The timely identification of problem loans is a key element in our strategy to manage our loan portfolio. Problem loans are all criticized, classified and nonperforming loans and other real estate owned. Timely identification enables us to take appropriate action and accordingly, minimize losses. An asset review system established to monitor the asset quality of our loans and investments in real estate portfolios facilitates the identification of problem assets. In general, this system utilizes guidelines established by federal regulation.

INTEREST RATE SENSITIVITY

The matching of maturities or repricing periods of interest rate-sensitive assets and liabilities to promote a favorable interest rate spread and mitigate exposure to fluctuations in interest rates is our primary tool for achieving our asset/liability management strategies. We regularly review our interest rate sensitivity and adjust the sensitivity within acceptable tolerance ranges. At SeptemberJune 30, 2017, interest-earning2019, interest-bearing liabilities exceeded interest-bearinginterest-earning assets that mature or reprice within one year (interest-sensitive gap) by $116.9$371 million. Our interest-sensitive assets as a percentage of interest-sensitive liabilities within the one-year window increased from 91.03%was 92.49% at June 30, 2019 compared with 98.67% at December 31, 2016 to 96.35% at September 30, 2017.2018. Likewise, the one-year interest-sensitive gap as a percentage of total assets increased from (4.41)was (3.05)% at June 30, 2019 compared with (0.57)% at December 31, 2016 to (1.70)% at September 30, 2017.2018. The low rate levellower one-year interest-sensitive gap along with a more neutral net interest margin resulted from the acquisition of sensitivity reflects our continuing efforts to effectively manage interest rate risk.Beneficial.

Market risk is the risk of loss from adverse changes in market prices and rates. Our market risk arises primarily from interest rate risk inherent in our lending, investing, and funding activities. To that end, we actively monitor and manage our interest rate risk exposure. One measure, which we are required to perform by federal regulation, measures the impact of an immediate change in interest rates in 100 basis point increments on the economic value of equity ratio. The economic value of the equity ratio is defined as the economic value of the estimated cash flows from assets and liabilities as a percentage of economic value of cash flows from total assets.
The following table shows the estimated impact of immediate changes in interest rates on our net interest margin and economic value of equity ratio at the specified levels at SeptemberJune 30, 20172019 and December 31, 2016:2018:
 September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
% Change in Interest Rate (Basis Points) 
% Change in Net
Interest Margin (1)
 
Economic Value of Equity (2)
 
% Change in Net
Interest Margin (1)
 
Economic Value of Equity (2)
 
% Change in Net
Interest Margin(1)
 
Economic Value of Equity(2)
 
% Change in Net
Interest Margin(1)
 
Economic Value of Equity(2)
+300 6% 15.95% 3% 14.04% 5.1% 19.07% 8.0% 16.93%
+200 4% 15.96% 2% 14.09% 3.6% 19.48% 5.0% 17.19%
+100 2% 15.79% <1% 14.00% 1.9% 19.77% 3.0% 17.26%
+50 1.0% 19.80% 1.3% 17.25%
+25 0.5% 19.79% 0.7% 17.24%
— —% 15.47% —% 13.80% —% 19.75% —% 17.21%
-25 (0.5)% 19.69% (0.7)% 17.16%
-50 (1.1)% 19.59% (1.5)% 17.09%
-100 (3)% 14.53% <1% 13.08% (2.8)% 19.27% (4.0)% 16.82%
-200(3)
 NMF NMF NMF NMF
-200 (7.0)% 18.07% (9.0)% 15.87%
-300(3)
 NMF NMF NMF NMF NMF NMF NMF NMF
(1) 
The percentage difference between net interest margin in a stable interest rate environment and net interest margin as projected under the various rate change environments.
(2) 
The economic value of equity ratio of the Company in a stable interest rate environment and the economic value of equity ratio as projected under the various rate change environments.
(3) 
Sensitivity indicated by a decrease of 200 or 300 basis points is not deemed meaningful (NMF) given the low absolute level of interest rates in the periods presented.
We also engage in other business activities that are sensitive to changes in interest rates. For example, mortgage banking revenues and expenses can fluctuate with changing interest rates. These fluctuations are difficult to model and estimate.



RESULTS OF OPERATIONS
Three months ended SeptemberJune 30, 20172019:NetFor the three months ended June 30, 2019, net income was $20.6$36.2 million compared with $28.7 million for the three months ended SeptemberJune 30, 2017 compared with $12.72018. Net interest income increased $62.2 million forduring the three months ended SeptemberJune 30, 2016. 2019 compared to three months ended June 30, 2018, primarily due to the acquisition of Beneficial and improved positioning in the higher short-term interest rate environment over the last year. See “Net interestInterest Income” for further information. Noninterest income for the three months ended SeptemberJune 30, 2017 was $56.12019 increased $7.9 million an increasein comparison with the three months ended June 30, 2018, primarily due to growth across most of $7.1our business lines and unrealized gains of $1.0 million on our investments in Visa Class B shares and Spring EQ for the three months ended June 30, 2019. See “Noninterest (Fee) Income” for further information. Noninterest expense increased $50.0 million during the three months ended June 30, 2019 compared to the three months ended SeptemberJune 30, 2016, due primarily to loan portfolio growth, partially offset by higher interest expense related to deposit growth, our issuance of the 2016 senior notes during the second quarter of 2016, and higher FHLB advances. Noninterest income increased $4.9 million to $32.4 million during the three months ended September 30, 2017,2018 , primarily due to increased investment management$15.8 million of corporate development and fiduciary revenuerestructuring costs related to our merger with Beneficial, and growth in credit/debit card and ATM income. See “Noninterest (Fee) Income” for further information. Partially offsetting these increases was a $2.9 million increase in noninterest expense during the three months ended September 30, 2017, primarily reflecting higher employee-related costs and ongoingother operating costs to support our organic and acquisitionmerger-related growth. See “Noninterest Expense” for further information.
NineSix months ended SeptemberJune 30, 20172019: NetFor the six months ended June 30, 2019, net income was $60.1$49.2 million compared with $66.1 million for the ninesix months ended SeptemberJune 30, 2017 compared with $46.0 million for the nine months ended September 30, 2016.2018. Net interest income forincreased $87.8 million during the ninesix months ended SeptemberJune 30, 2017 was $163.5 million, an increase of $22.8 million2019 compared to the ninesix months ended SeptemberJune 30, 2016,2018, primarily due primarily tothe acquisition of Beneficial, as well as improved positioning in the higher short-term interest rate environment over the last year, pricing discipline, and loan portfoliogrowth. See “Net Interest Income” for further information. Noninterest income for the six months ended June 30, 2019 increased $1.5 million in comparison with the six months ended June 30, 2018, reflecting growth across most of our business lines, partially offset by higher interest expense related to deposit growth, our issuancea decrease of the 2016 senior notes late$10.5 million in the second quarteramount of 2016,unrealized gains on our investments in Visa Class B shares and higher FHLB advances. Spring EQ for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. See “Noninterest income(Fee) Income” for further information. Noninterest expense increased $15.4 million to $92.2$94.2 million during the ninesix months ended SeptemberJune 30, 2017,2019 compared to the six months ended June 30, 2018, primarily due to increased investment management$46.8 million of corporate development and fiduciary revenuerestructuring costs related to our acquisition of Beneficial, and growth in credit/debit card and ATM income. See “Noninterest (Fee) Income” for further information. Partially offsetting these increases was a $18.7 million increase in noninterest expenses during the nine months ended September 30, 2017, primarily reflecting higher employee-related costs and ongoingother operating costs to support our organic and acquisitionmerger-related growth. See “Noninterest Expense” for further information.
Efficiency Ratio: Our noninterest expenses are driven by our high-touch, high-service model. This, combined with our significant and diverse fee income mix, resulted in a third quarter 2017 efficiency ratio of 60.6% compared to 66.2% for the third quarter of 2016 and 60.8% for the second quarter of 2017. Management believes its operating costs are at an appropriate level and scale for our size, products and services as our fee-based businesses typically carry a higher efficiency ratio as they derive revenue primarily based on active human capital costs versus passive assets. We continue to optimize and review our operations in order to limit cost increases or reduce costs, and expect continued improvement of our efficiency ratio in the fourth quarter, resulting in a fourth quarter ratio in the high 50%s. We expect to achieve our goal of a relatively flat efficiency ratio for the full year 2017 as compared to full year 2016 through continued reinvestment in our balance sheet and capabilities to support our organic and acquisition-related growth, as well as increased contributions from our fee-based businesses.


Net Interest Income
The following tables providetable provides information concerning the balances, yields and rates on interest-earning assets and interest-bearing liabilities during the periods indicated:
 Three months ended September 30, Three months ended June 30,
 2017 2016 2019 2018
(Dollars in thousands) 
Average
Balance
 Interest 
Yield/
Rate (1)
 
Average
Balance
 Interest 
Yield/
Rate (1)
 
Average
Balance
 Interest 
Yield/
Rate(1)
 
Average
Balance
 Interest 
Yield/
Rate(1)
Assets:                        
Interest-earning assets:                        
Loans: (2)
                        
Commercial real estate loans $1,422,306
 $18,186
 5.07% $1,264,882
 $15,470
 4.87% $2,857,091
 $45,458
 6.38% $1,437,117
 $19,394
 5.41%
Residential real estate loans 269,134
 3,747
 5.57
 283,818
 4,490
 6.33
 1,102,362
 15,359
 5.57
 239,054
 3,516
 5.88
Commercial loans 2,471,382
 30,013
 4.85
 2,187,214
 25,050
 4.59
 3,571,559
 51,798
 5.83
 2,574,777
 33,375
 5.22
Consumer loans 509,750
 6,329
 4.93
 414,653
 4,485
 4.30
 1,126,385
 15,958
 5.68
 600,683
 7,847
 5.24
Loans held for sale 22,734
 229
 4.03
 40,615
 354
 3.49
 37,728
 428
 4.55
 23,680
 310
 5.25
Total loans 4,695,306
 58,504
 4.96
 4,191,182
 49,849
 4.75
 8,695,125
 129,001
 5.96
 4,875,311
 64,442
 5.31
Mortgage-backed securities (3)
 809,655
 4,955
 2.45
 736,100
 3,854
 2.09
 1,653,582
 12,229
 2.96
 934,411
 6,190
 2.65
Investment securities (3)
 168,526
 1,139
 4.08
 201,264
 1,214
 3.54
 146,064
 1,030
 3.39
 158,266
 1,108
 3.41
Other interest-earning assets 36,992
 412
 4.46
 35,033
 420
 4.80
 89,145
 643
 2.89
 26,815
 411
 6.15
Total interest-earning assets 5,710,479
 65,010
 4.57% 5,163,579
 55,337
 4.32% 10,583,916
 142,903
 5.43% 5,994,803
 72,151
 4.85%
Allowance for loan losses (40,831)     (39,053)     (46,719)     (41,682)    
Cash and due from banks 118,056
     122,561
     112,657
     127,293
    
Cash in non-owned ATMs 558,855
     600,821
     364,236
     531,524
    
Bank-owned life insurance 102,513
     100,989
     56,332
     5,724
    
Other noninterest-earning assets 344,783
     241,370
     1,052,544
     354,392
    
Total assets $6,793,855
     $6,190,267
     $12,122,966
     $6,972,054
    
Liabilities and Stockholders’ Equity:                        
Interest-bearing liabilities:                        
Interest-bearing deposits:                        
Interest-bearing demand $939,239
 $606
 0.26% $855,052
 $295
 0.14% $2,029,361
 $2,163
 0.43% $973,498
 $921
 0.38%
Money market 1,324,946
 1,227
 0.37
 1,162,986
 850
 0.29
 1,936,112
 4,932
 1.02
 1,390,675
 1,823
 0.53
Savings 564,275
 264
 0.19
 494,482
 180
 0.14
 1,657,790
 2,009
 0.49
 566,766
 260
 0.18
Customer time deposits 555,668
 1,188
 0.85
 567,600
 874
 0.61
 1,476,763
 5,100
 1.39
 657,332
 1,990
 1.21
Total interest-bearing customer deposits 3,384,128
 3,285
 0.39
 3,080,120
 2,199
 0.28
 7,100,026
 14,204
 0.80
 3,588,271
 4,994
 0.56
Brokered certificates of deposit 195,073
 577
 1.17
 142,133
 213
 0.60
 307,514
 1,919
 2.50
 317,539
 1,374
 1.74
Total interest-bearing deposits 3,579,201
 3,862
 0.43
 3,222,253
 2,412
 0.30
 7,407,540
 16,123
 0.87
 3,905,810
 6,368
 0.65
FHLB of Pittsburgh advances 730,390
 2,402
 1.30
 768,305
 1,225
 0.63
Federal Home Loan Bank advances 134,151
 806
 2.41
 516,411
 2,536
 1.97
Trust preferred borrowings 67,011
 500
 2.96
 67,011
 415
 2.46
 67,011
 717
 4.29
 67,011
 637
 3.81
Senior debt 134,658
 1,807
 5.37
 151,875
 2,119
 5.58
 98,464
 1,180
 4.79
 98,247
 1,180
 4.80
Other borrowed funds (4)
 132,030
 310
 0.93
 114,312
 145
 0.50
 161,903
 845
 2.09
 131,776
 441
 1.34
Total interest-bearing liabilities 4,643,290
 8,881
 0.76% 4,323,756
 6,316
 0.58% 7,869,069
 19,671
 1.00% 4,719,255
 11,162
 0.95%
Noninterest-bearing demand deposits 1,333,266
     1,151,240
     2,126,640
     1,420,988
    
Other noninterest-bearing liabilities 79,176
     54,686
     315,108
     74,395
    
Stockholders’ equity 738,123
     660,585
     1,812,302
     757,416
    
Noncontrolling interest (153)     —
    
Total liabilities and stockholders’ equity $6,793,855
     $6,190,267
     $12,122,966
     $6,972,054
    
Excess of interest-earning assets over interest-bearing liabilities $1,067,189
     $839,823
     $2,714,847
     $1,275,548
    
Net interest and dividend income   $56,129
     $49,021
     $123,232
     $60,989
  
Interest rate spread     3.81%     3.74%     4.43%     3.90%
Net interest margin     3.95%     3.84%     4.68%     4.10%
(1) 
Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis using a 35% effective tax rate.basis.
(2) 
Average balances are net of unearned income and include nonperforming loans.
(3) 
Includes securities available for sale at fair value.
(4) 
Includes federal funds purchased and securities sold under agreement to repurchase.purchased.



 Nine months ended September 30, Six months ended June 30,
 2017 2016 2019 2018
(Dollars in thousands) 
Average
Balance
 Interest 
Yield/
Rate (1)
 
Average
Balance
 Interest 
Yield/
Rate (1)
 
Average
Balance
 Interest 
Yield/
Rate(1)
 
Average
Balance
 Interest 
Yield/
Rate(1)
Assets:                        
Interest-earning assets:                        
Loans: (2)
                        
Commercial real estate loans $1,411,503
 $52,934
 5.01% $1,221,797
 $44,700
 4.89% $2,416,011
 $73,978
 6.17% $1,438,852
 $37,559
 5.26%
Residential real estate loans 275,020
 12,707
 6.16
 279,387
 13,563
 6.47
 817,109
 22,958
 5.62
 243,489
 7,348
 6.04
Commercial loans 2,432,837
 85,366
 4.72
 2,057,839
 69,364
 4.54
 3,214,989
 91,032
 5.72
 2,568,527
 64,584
 5.09
Consumer loans 482,008
 17,326
 4.81
 381,276
 12,652
 4.43
 985,248
 27,425
 5.61
 586,907
 14,928
 5.13
Loans held for sale 31,988
 925
 3.86
 34,945
 115
 0.44
 29,153
 725
 5.01
 20,041
 488
 4.92
Total loans 4,633,356
 169,258
 4.90
 3,975,244
 140,394
 4.74
 7,462,510
 216,118
 5.85
 4,857,816
 124,907
 5.19
Mortgage-backed securities (3)
 784,125
 14,132
 2.40
 724,978
 11,658
 2.14
 1,545,968
 22,695
 2.94
 888,401
 11,589
 2.61
Investment securities (3)
 187,747
 3,524
 3.71
 203,616
 3,660
 3.51
 147,587
 2,074
 3.40
 159,398
 2,228
 3.43
Other interest-earning assets 37,664
 1,256
 4.45
 32,694
 1,174
 4.79
 84,108
 1,593
 3.82
 29,993
 1,040
 6.99
Total interest-earning assets 5,642,892
 188,170
 4.51% 4,936,532
 156,886
 4.31% 9,240,173
 242,480
 5.31% 5,935,608
 139,764
 4.77%
Allowance for loan losses (40,646)     (37,987)     (43,593)     (41,574)    
Cash and due from banks 130,537
     144,420
     110,231
     123,679
    
Cash in non-owned ATMs 604,892
     481,570
     395,920
     526,608
    
Bank-owned life insurance 101,952
     91,208
     45,754
     46,166
    
Other noninterest-earning assets 345,514
     224,798
     870,940
     345,661
    
Total assets $6,785,141
     $5,840,541
     $10,619,425
     $6,936,148
    
Liabilities and Stockholders’ Equity:                        
Interest-bearing liabilities:                        
Interest-bearing deposits:                        
Interest-bearing demand $924,609
 $1,444
 0.31% $802,117
 $794
 0.13% $1,708,010
 $3,899
 0.46% $984,522
 $1,737
 0.36%
Money market 1,311,967
 3,314
 0.51
 1,120,831
 2,387
 0.28
 1,792,371
 8,771
 0.99
 1,388,766
 3,412
 0.50
Savings 575,676
 753
 0.26
 458,542
 431
 0.13
 1,304,443
 2,881
 0.45
 560,150
 514
 0.19
Customer time deposits 562,435
 3,338
 0.79
 564,240
 2,369
 0.56
 1,226,003
 8,364
 1.38
 640,034
 3,675
 1.16
Total interest-bearing customer deposits 3,374,687
 8,849
 0.35
 2,945,730
 5,981
 0.27
 6,030,827
 23,915
 0.80
 3,573,472
 9,338
 0.53
Brokered certificates of deposit 194,275
 1,429
 0.98
 180,066
 753
 0.56
 260,854
 3,150
 2.44
 286,098
 2,270
 1.60
Total interest-bearing deposits 3,568,962
 10,278
 0.39
 3,125,796
 6,734
 0.29
 6,291,681
 27,065
 0.87
 3,859,570
 11,608
 0.61
FHLB of Pittsburgh advances 744,939
 6,057
 1.09
 719,121
 3,397
 0.63
Federal Home Loan Bank advances 268,311
 3,396
 2.55
 558,494
 4,999
 1.81
Trust preferred borrowings 67,011
 1,418
 2.83
 67,011
 1,183
 2.36
 67,011
 1,443
 4.34
 67,011
 1,194
 3.59
Senior debt 146,267
 6,049
 5.51
 93,900
 4,236
 6.01
 98,437
 2,359
 4.79
 98,220
 2,359
 4.80
Other borrowed funds (4)
 133,863
 822
 0.82
 135,596
 545
 0.54
 167,547
 1,671
 2.01
 141,478
 901
 1.28
Total interest-bearing liabilities 4,661,042
 24,624
 0.71% 4,141,424
 16,095
 0.52% 6,892,987
 35,934
 1.05% 4,724,773
 21,061
 0.90%
Noninterest-bearing demand deposits 1,331,417
     1,027,746
     1,948,594
     1,385,861
    
Other noninterest-bearing liabilities 75,744
     51,605
     288,703
     83,862
    
Stockholders’ equity 716,938
     619,766
     1,489,241
     741,652
    
Noncontrolling interest (100)     —
    
Total liabilities and stockholders’ equity $6,785,141
     $5,840,541
     $10,619,425
     $6,936,148
    
Excess of interest-earning assets over interest-bearing liabilities $981,850
     $795,108
     $2,347,186
     $1,210,835
    
Net interest and dividend income   $163,546
     $140,791
     $206,546
     $118,703
  
Interest rate spread     3.80%     3.79%     4.26%     3.87%
Net interest margin     3.93%     3.87%     4.52%     4.06%
(1) 
Weighted average yields for tax-exempt securities and loans have been computed on a tax-equivalent basis using a 35% effective tax rate.basis.
(2) 
Average balances are net of unearned income and include nonperforming loans.
(3) 
Includes securities available for sale at fair value.
(4) 
Includes federal funds purchased and securities sold under agreement to repurchase.purchased.



Three months ended June 30, 2019:During the three months ended SeptemberJune 30, 2017,2019, net interest income increased $7.1$62.2 million, or 14%102% from the three months ended SeptemberJune 30, 2016.2018. Net interest margin was 3.95%4.68% for the thirdsecond quarter of 2017, an 112019, a 58 basis pointpoints increase compared to 3.84%4.10% for the thirdsecond quarter of 2016. The2018. This increase in net interest margin includes approximately 29 bps of higher modeled purchase-related accretion, approximately 16 bps from incremental accretion due to pay-offs during the positive effectsquarter, and 13 bps resulting from the overallsuccessful balance sheet optimization and improved positioning in the higher short-term interest rate environment our acquisition of Penn Liberty Financial Corp. (Penn Liberty), disciplined pricing of loans and deposits, andover the redemption of $55.0 million of the 2012 senior notes in late third quarter 2017,last year, partially offset by the negative impact of lower purchased loan accretion from previous acquisitions (excluding Penn Liberty).expected margin compression due to Beneficial's lower-margin balance sheet.
Six months ended June 30, 2019:During the ninesix months ended SeptemberJune 30, 2017,2019, net interest income increased $22.8$87.8 million, or 16%74% from the ninesix months ended SeptemberJune 30, 2016, and the net2018. Net interest margin was 3.93%,4.52% for the first half of 2019, a 646 basis pointpoints increase compared to 3.87%4.06% for the nine months ended September 30, 2016. These year-over-year increases reflectfirst half of 2018. This increase includes an 26 bps increase from purchase-related accretion from the positive effects of our acquisition of Penn Liberty, disciplined pricing of loansBeneficial, 14 bps from incremental accretion due to pay-offs during the period and deposits,6 bps due to improved positioning in the higher short-term interest rate environment over the last year and impact of purchased loan accretion from recent acquisitions.our balance sheet optimization, partially offset by expected margin compression due to Beneficial's lower-margin balance sheet.
Provision/Allowance for Loan Losses
We maintain an allowance for loan losses at an appropriate level based on our assessment of estimable and probable losses in the loan portfolio. Our evaluation is based on a review of the portfolio and requires significant, complex and difficult judgments. For the three months ended September 30, 2017 and 2016, we recorded a provision for loan losses of $2.9 million and $5.8 million, respectively, and for the nine months ended September 30, 2017 and 2016, we recorded a provision for loan losses of $6.9 million and $7.9 million, respectively. Provision for the third quarter of 2017 decreased $2.9 million from the third quarter of 2016, as the third quarter of 2016 included $3.0 million of provision expense related to resolution of a large longstanding problem loan.
Our allowance for loan losses is based on the inherent risk of our loans and various other factors including but not limited to, collateral values, trends in asset quality, level of delinquent loans and concentrations. In addition, regional economic conditions are taken into consideration. See Note 6Our evaluation is based on a review of the portfolio and requires significant, complex and difficult judgments.
For the three months ended June 30, 2019 and 2018, we recorded a provision for loan losses of $12.2 million and $2.5 million, respectively. For the six months ended June 30, 2019 and 2018, we recorded a provision for loan losses of $19.8 million and $6.1 million, respectively. For the three and six months ended June 30, 2019, provision for loan losses increased $9.7 million and $13.7 million, respectively, from the same periods in 2018, primarily due to two legacy WSFS C&I loans, previously classified as nonperforming, that experienced significant credit events in the Consolidated Financial Statementssecond quarter of 2019 resulting in higher levels of provision for additional information.loan losses and charge-offs.
The allowance for loan losses was $40.2$45.4 million at SeptemberJune 30, 20172019 and $39.8$39.5 million at December 31, 2016. The allowance for loan losses and provision reflects the addition of reserves related to an increase of $227.0 million in total net loans (excluding reverse mortgages) at September 30, 2017 when compared to December 31, 2016 as well as loan downgrades, offset by payoff activity and improvement in qualitative adjustment factors due to continued improvement of economic conditions and continued favorable credit quality metrics.2018. The ratio of allowance for loan losses to total gross loans was 0.86%0.53% at SeptemberJune 30, 20172019 and 0.89%0.81% at December 31, 2016. This ratio excluding2018. Excluding the impact of all purchased loans, this ratio would have been 0.99% and 0.89% at SeptemberJune 30, 20172019 and 1.08% at December 31, 2016.

2018, respectively. The table below represents a summaryratio of changes innet charge-offs to average gross loans net of unearned income, which excludes loans held for sale and reverse mortgages, was 0.38% and 0.29% (annualized) at June 30, 2019 and December 31, 2018, respectively. The ALLL was 121% of nonaccruing loans at June 30, 2019, compared to 113% at June 30, 2018. See Note 8 to the allowanceunaudited Consolidated Financial Statements for loan losses for the nine months ended September 30, 2017 and 2016, respectively.
  Nine months ended September 30,
(Dollars in thousands) 2017 2016
Beginning balance $39,751
 $37,089
Provision for loan losses 6,901
 7,862
Charge-offs:    
Commercial 3,787
 4,643
Owner-occupied commercial 296
 1,556
Commercial real estate 1,702
 79
Construction 346
 59
Residential real estate 112
 72
Consumer 2,017
 1,422
Overdrafts 589
 545
Total charge-offs 8,849
 8,376
Recoveries:    
Commercial 820
 557
Owner-occupied commercial 120
 66
Commercial real estate 69
 310
Construction 305
 486
Residential real estate 141
 112
Consumer 731
 709
Overdrafts 212
 213
Total recoveries 2,398
 2,453
Net charge-offs 6,451
 5,923
Ending balance $40,201
 $39,028
Net charge-offs to average gross loans outstanding, net of unearned income (1)
 0.19% 0.20%
(1) Annualized, excludes loans held for sale and reverse mortgages
    
further information.
Noninterest (Fee) Income
Three months ended June 30, 2019:During the third quarter of 2017, the Company earned feethree months ended June 30, 2019, noninterest (fee) income of $32.4was $42.9 million, an increase of $4.9$7.9 million or 18%, compared to $27.6$35.0 million during the three months ended June 30, 2018, primarily due to increases of $3.0 million from credit/debit card and ATM income, primarily from higher bailment revenue from our Cash Connect® division and the impact of the Beneficial acquisition, $1.4 million in deposit service charges, primarily due to our acquisition of Beneficial, $1.2 million in mortgage banking activities, and $1.0 million in the third quarteramount of 2016. Thisunrealized gain on equity investments for the three months ended June 30, 2019 compared to the three months ended June 30, 2018.
Six months ended June 30, 2019:For the six months ended June 30, 2019, noninterest (fee) income was $84.0 million, an increase isof $1.5 million from $82.5 million for the six months ended June 30, 2018, and includes a decrease of $10.5 million in realized and unrealized gains on our equity investments. Excluding this decrease, noninterest income increased $12.1 million for the six months ended June 30, 2019, primarily due to a $2.7 million increase in investment management and fiduciary income due to growth in several business lines in our Wealth Management segment, an increaseincreases of $1.6$4.7 million in credit/debit card and ATM income, and a $0.5 million increase in other fee incomereflecting growth due to expanded revenue sources in our Cash Connect® business as well asand the impact of the Beneficial acquisition, $2.4 million in other non-interest income, which includes income related to a $0.4non-recurring transfer of client accounts to a departing Wealth investment adviser, in accordance with the buy-out provisions of the adviser's contract, $1.6 million gain onin deposit service charges, which reflects the saleimpact of Small Business Administration (SBA) loans. These increases were partially offset by a declineour acquisition of $0.8Beneficial, and $1.5 million in mortgage banking-related fee income duebanking activities.
For further information, see Note 4 to reduced mortgage volume in the higher rate environment compared to 2016.unaudited Consolidated Financial Statements.
For the nine months ended September 30, 2017, our fee income was $92.2 million, an increase of $15.4 million, or 20%, compared to $76.8 million in the third quarter of 2016. This increase is primarily due to a $8.1 million increase in investment management and fiduciary income due to growth in several business lines in our Wealth Management segment, an increase of $4.5 million in credit/debit card and ATM income and a $1.4 million increase in other fee income due to expanded revenue sources and continued growth in our Cash Connect® business, as well as a $1.2 million increase attributable to gains on the sale of SBA loans.
Noninterest Expense
Three months ended June 30, 2019:Noninterest expense for the third quarter of 2017three months ended June 30, 2019 was $54.2$107.8 million, an increase of $2.9$50.0 million or 6%, from $51.2$57.8 million compared to the three months ended June 30, 2018, and includes an increase of $15.4 million in corporate development and restructuring costs related to our acquisition of Beneficial. Excluding these costs, noninterest expense for the third quarterthree months ended June 30, 2019 increased $34.6 million compared to the three months ended June 30, 2018, which was primarily due to increases of 2016, primarily the result$17.6 million in salaries, benefits and other compensation, $6.7 million of ongoinghigher operating costs, fromand $3.8 million in higher occupancy costs, all supporting growth in our late 2016 combinations with Penn Liberty, Powdermill,balance sheet and West Capital.fee-based businesses and reflecting the impact of the Beneficial acquisition.

For the nineSix months ended SeptemberJune 30, 2017, noninterest2019:Noninterest expense for the six months ended June 30, 2019 was $158.4$205.4 million, an increase of $18.7$94.2 million or 13% from $139.7$111.2 million at Septemberduring the six months ended June 30, 2016. The2018, and includes an increase of $46.4 million in corporate development and restructuring costs related to our acquisition of Beneficial. Excluding these costs, noninterest expense for the six months ended June 30, 2019 increased $47.8 million, compared with the six months ended June 30, 2018, which was primarily due to $10.9increases of $24.0 million in additional year-over-year ongoingsalaries, benefits and other compensation costs, $8.5 million of higher operating costs, from recent acquisitions. The remaining increase primarily reflects$4.9 million in occupancy costs, and $3.2 million of higher compensation and relatedequipment costs, due to added staff to supportall supporting overall franchise growth.growth and reflecting the impact of the Beneficial acquisition.
Income Taxes
We and our subsidiaries file a consolidated federal income tax return and separate state income tax returns. Income taxes are accounted for in accordance with ASC 740, Income Taxes, which requires the recording of deferred income taxes for tax consequences of temporary differences. We recorded an income tax expense of $10.9$10.1 million and $30.4$16.4 million during the three and ninesix months ended SeptemberJune 30, 2017,2019, respectively compared to an income tax expense of $6.8$6.9 million and $24.0$17.7 million for the same periods in 2016.2018.
Our effective tax rate was 34.7%21.9% and 33.6%25.1% for the three and ninesix months ended SeptemberJune 30, 20172019, compared to 34.9%19.4% and 34.3%21.1% during the same periods in 2016.2018.  The effective tax rate for the ninesix months ended SeptemberJune 30, 2017 decreased2019 increased primarily due to non-deductible expenses associated with the acquisition of Beneficial. Nondeductible acquisition costs of $8.2 million were recognized during the six months ended June 30, 2019 whereas none were incurred in the comparable period in 2018. Further, the tax benefit related to stock-based compensation activity during the year, duesix months ended June 30, 2019 pursuant to both the adoption of ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, Compensation –- Stock Compensation (Topic 718) during, decreased compared to the second quarter of 2016, as well as higher tax benefits realized on stock-based compensation activity during the nine months ended September 30, 2017, due to greater transaction volume and increases in the Company’s stock price.prior year. The tax benefitsbenefit recognized during the three and ninesix months ended SeptemberJune 30, 20172019 were $0.3$1.2 million and $1.9$1.3 million, respectively, compared to tax benefits of $0.2$1.5 million and $1.0$2.1 million for the three and nine months ended September 30, 2016.comparable period in 2018.
The effective tax rate reflects the recognition of certain tax benefits in the financial statements including those benefits from tax-exempt interest income, federal low-income housing tax credits, and excess tax benefits from recognized stock compensation, and BOLI income.compensation. These tax benefits are offset by the tax effect of stock-based compensation expense related to incentive stock options, nondeductible acquisition costs and a provision for state income tax expense.
We frequently analyze our projections of taxable income and make adjustments to our provision for income taxes accordingly.
Contractual Obligations
Our contractual obligations at SeptemberJune 30, 20172019 did not significantly change from our contractual obligations at December 31, 2016, which are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016, and at March 31, 2017,2019, which are disclosed in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017.2019.



RECONCILIATION OF NON-GAAP MEASURE TO GAAP MEASURE
The following table provides a reconciliation of tangible common book value per share of common stock to book value per share of common stock, the most directly comparable GAAP financial measure. We believe this measure helps management and investors better understand and assess changes from period to period in stockholders’ equity exclusive of changes in intangible assets.
This non-GAAP data should be considered in addition to results prepared in accordance with GAAP, and is not a substitute for, or superior to, GAAP results.
(Dollars and share amounts in thousands, except per share amounts) September 30, 2017 December 31, 2016 June 30, 2019 December 31, 2018
Stockholders’ equity $740,861
 $687,336
 $1,836,611
 $820,920
Less: Goodwill and other intangible assets 189,116
 191,247
 575,696
 186,023
Tangible common equity (numerator) $551,745
 $496,089
 $1,260,915
 $634,897
Shares of common stock outstanding (denominator) 31,410
 31,390
 53,232
 31,374
Book value per share of common stock $23.59
 $21.90
 $34.50
 $26.17
Goodwill and other intangible assets 6.02
 6.10
 10.81
 5.93
Tangible book value per share of common stock $17.57
 $15.80
 $23.69
 $20.24


CRITICAL ACCOUNTING ESTIMATES
The preparation of the unaudited Consolidated Financial Statements in accordance with U.S. GAAP requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenue and expenses. We regularly evaluate these estimates and assumptions including those used to determine the allowance for loan losses, deferred taxes, fair value measurements, goodwill and other intangible assets. We base our estimates on historical experience and various other factors and assumptions that are believed to be reasonable under the circumstances. These form the basis for making judgments on the carrying value of assets and liabilities that are not readily apparent from other sources. Although our current estimates contemplate current economic conditions and how we expect them to change in the future, for the remainder of 2017,2019, it is possible that actual conditions may be worse than anticipated in those estimates, which could materially affect our results of operations and financial condition. Actual results may differ from these estimates under different assumptions or conditions.
For further discussion of our critical accounting estimates, see the "Management's“Management's Discussion and Analysis - Critical Accounting Estimates"Estimates” section of our Annual Report on Form 10-K for the year ended December 31, 2016.2018.


RECENT LEGISLATIONREGULATORY DEVELOPMENTS
General
As a federally chartered savings institution the Bank is subject to regulation by the Federal Housing Finance Agency (FHFA), an independent agency in the executive branch of the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (Federal Reserve) and the Office of the Comptroller of the Currency (OCC), collectively referred to as the Federal banking agencies. The lending activities and other investments of the Bank must comply with various federal regulatory requirements. The OCC periodically examines the Bank for compliance with regulatory requirements.requirements as well as to assess the Bank’s safety and soundness. The FDIC also has the authority to conduct special examinations of the Bank. The Bank is required to file periodic reports with the OCC describing its activities and financial condition. The Bank is also subject to certain reserve requirements promulgated by the FHFA and the Federal Reserve.
Financial Reform Legislation
The Dodd-Frank Act, which was enacted in 2010, imposed new restrictions and an expanded framework of regulatory oversight for financial institutions and their holding companies, including insured depository institutions. The law also established the Consumer Financial Protection Bureau (CFPB) as an independent agency within the Federal Reserve. Some of the provisions of the Dodd-Frank Act have increased our expenses, decreased our revenues, and changed the activities in which we engage.

In May 2018, the Economic Growth Act was signed into law. The Economic Growth Act amends portions of the Dodd-Frank Act in order to provide regulatory relief to banking organizations such as ourselves. Among other reforms, the Economic Growth Act revised the risk-weighting of certain commercial real estate loans. The Basel III Capital Rules as finalized in 2013 required a banking organization to risk weight certain commercial real estate loans that were determined to have high volatility at 150% rather than at 100% for other commercial real estate (CRE) loans. In order to avoid high volatility commercial real estate (HVCRE) status and the higher risk weight, a CRE loan had to meet several requirements, including an equity contribution form the borrower in the form of cash, unencumbered readily marketable assets, or paid development expenses out of pocket. A lender could not return the contribution to the borrower until the loan was paid off or replaced with permanent financing. The Economic Growth Act replaced the HVCRE category with a narrower category for HVCRE acquisition, development, and construction (HVCRE ADC) loans. Among other things, a borrower may now make its equity contribution in the form of real property or improvements, and the lender may reclassify an HVCRE ADC loan more easily, enabling the lender to return the equity contribution to the borrower more easily. The federal banking agencies issued an interim final rule in September 2018 to implement these changes. We have not yet determined the impact of these changes on our CRE loan portfolio.
Several but not all of the reforms are limited to banking organizations with less than $10 billion in total consolidated assets. At June 30, 2019, as a result of our acquisition of Beneficial, our total consolidated assets at both the Company and Bank levels exceeded $10 billion, and we have ceased to be eligible for many of these changes. However, we may take advantage of certain other changes wrought by the Economic Growth Act. Dodd-Frank imposed certain enhanced prudential standards relating to stress testing and risk management on bank holding companies with more than $10 billion in total consolidated assets. The Economic Growth Act presumptively lifts the threshold for these requirements to at least $100 billion, and the Federal Reserve Board has proposed rules to implement these provisions. Accordingly the stress testing and risk management standards do not apply to the Company.
Basel III
In 2013, the Federal banking agencies approved the final rules implementing the Basel Committee on Banking Supervision capital guidelines for U.S. banking organizations. Under the final rules as of January 2015, minimum requirements increased for both the quantity and quality of capital maintained by the Company and the Bank. The rules included a new common equity Tier 1 capital to risk-weighted assets minimum ratio of 4.5%, raised the minimum ratio of Tier 1 capital to risk-weighted assets from 4.0% to 6.0%, required a minimum ratio of total capital to risk-weighted assets of 10.0%8.0%, and required a minimum Tier 1 leverage ratio of 4.0%. The final rule also established
In addition, the capital rules subject a newbanking organization to certain limitations on capital distributions and discretionary bonus payments to executive officers if the organization does not maintain a capital conservation buffer, comprisedbuffer: a ratio of common equity TierCET 1 capital, aboveto total risk-based assets of at least 2.5% on top of the regulatory minimum risk-based capital requirements. The phase-inimplementation of the capital conservation buffer began to phase in on January 1, 2016, at 0.625% of risk-weighted assets and will increase each subsequent year by an additional 0.625% until reaching its final level of 2.50%took effect on January 1, 2019. For 2017,As a result, as of January 1, 2019, the Company and the Bank must adhere to the following minimum capital conservation buffer is 1.25%ratios to satisfy the Basel III Capital Rule requirements and to avoid the limitations on capital distributions and discretionary bonus payments to executive officers: (i) 4.0% tier 1 leverage ratio; (ii) minimum CET 1 risk-based capital ratio of 7.0%; (iii) minimum tier 1 risk-based capital ratio of 8.5%; and (iv) minimum total risk-based capital ratio of 10.5%. The final rules also revised the standards for an insured depository institution to be “well-capitalized” under the banking agencies’ prompt corrective action framework, requiring a common equity Tier 1 capital ratio of 6.5%, Tier 1 capital ratio of 8.0% and total capital ratio of 10.0%8.0%, while leaving unchanged the existing 5.0% leverage ratio requirement. Strict eligibility criteria for regulatory capital instruments were also implemented under the final rules. Newly issued trust preferred securities and cumulative perpetual preferred stock may no longer be included in Tier 1 capital. However, for depository institution holding companies of less than $15 billion in total consolidated assets, such as the Company, most outstanding trust preferred securities and other non-qualifying securities issued prior to May 19, 2010 are permanently grandfathered to be included in Tier 1 capital (up to a limit of 25% of Tier 1 capital, excluding non-qualifying capital instruments). As of SeptemberJune 30, 2017,2019, we had approximately $67.0 million of trust preferred securities outstanding, all of which are counted as Tier 1 capital.
The phase-in period for the final rules began for us on January 1, 2015. Full compliance with all of the final rule’s requirements phased in over a multi-year schedule iswas required by January 1, 2019. As of SeptemberJune 30, 2017,2019, the Company and the Bank met the applicable standards, and the Bank was “well-capitalized” under the prompt corrective action rules. The Economic Growth Act created a “community bank leverage ratio” to ease the capital requirements for banks with less than $10 billion in total consolidated assets, after the acquisition of Beneficial, the Bank may not take advantage of this change.
In 2014, the Federal banking agencies adopted a “liquidity coverage ratio” requirement (LCR) for large internationally active banking organizations, and in 2016, the agencies proposed a “net stable funding ratio” standard (NSFR) for the same group of institutions. The LCR measures an organizations’ ability to meet liquidity demands over a 30-day horizon; the NSFR would test the same capacity over a one-year horizon. Neither requirement applies directly to the Company or the Bank, but the policies embedded in them may inform the work of the examiners as they consider our liquidity.

Debit Card Interchange Fees
The Federal Reserve has issued rules under the Electronic Funds Transfer Act, as amended by a section of the Dodd-Frank Act, known as the Durbin Amendment, to limit interchange fees that an issuer may receive or charge for an electronic debit card transaction. Under the rules, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction and five basis points multiplied by the value of the transaction. In addition, the rules allow for an upward adjustment of no more than one cent to an issuer’s debit card interchange fee if the issuer develops and implements policies and procedures reasonably designed to achieve the fraud-prevention standards set out in the rule.
In accordance with the statute, the interchange fee standards do not apply to fees charged by issuers that, together with their affiliates, have assets of less than $10.0 billion on the annual measurement date (December 31), against debit accounts that they hold. As a result of our acquisition of Beneficial our total consolidated assets at both the Company and Bank levels will exceed $10 billion on December 31, 2019, and we will become subject to the Durbin Amendment rules in 2020.
Transition from London Inter-Bank Offered Rate (LIBOR)
In 2014, a committee of private-market derivative participants and their regulators, the Alternative Reference Rate Committee (ARRC), was convened by the Federal Reserve to identify an alternative reference interest rate to replace LIBOR. In June 2017, the ARRC announced the Secured Overnight Funding Rate (SOFR), a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, as its preferred alternative to LIBOR. In July 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced its intention to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. In April 2018, the Federal Reserve Bank of New York began to publish SOFR rates on a daily basis.
Given LIBOR’s extensive use across financial markets, the transition away from LIBOR presents various risks and challenges to financial markets and institutions, including to the Company. The Company’s commercial and consumer businesses issue, trade, and hold various products that are indexed to LIBOR. As of June 30, 2019, the Company had approximately $1.4 billion of loans and $748 million of derivatives, including notional value of $25 million of balance sheet swaps and $723 million of customer guarantees, indexed to LIBOR that mature after 2021. In addition, the Company had approximately $167 million of debt securities outstanding that are indexed to LIBOR (either currently or in the future) as of June 30, 2019. The Company had no investment securities, repurchase and resale agreements or FHLB advances indexed to LIBOR as of June 30, 2019. The Company’s financial instruments and products that are indexed to LIBOR are significant, and if not sufficiently planned for, the discontinuation of LIBOR could result in financial, operational, legal, reputational or compliance risks. 
Due to the uncertainty surrounding the future of LIBOR, it is expected that the transition will span several reporting periods through, and potentially beyond, the end of 2021. A cross-functional team from Finance, Lending, Risk and IT is leading our efforts to monitor this activity and evaluate the related risks and potential process changes arising from the transition from LIBOR. Once the initial assessment efforts are completed, which is anticipated to occur by the end of 2019, the cross-functional team, with assistance from external resources as needed, will lead the transition effort. For additional information related to the potential impact surrounding the transition from LIBOR on the Company’s business, see Item 1A. Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, previously filed with the Securities and Exchange Commission.
CFPB
The CFPB is responsible for writing and reviewing the consumer protection regulations that apply to various financial institutions, including insured depository institutions. Responsibility for examinations and enforcement with respect to a bank is divided between the OCC and the CFPB, depending on whether the bank has more or less than $10 billion in total consolidated assets. Prior to our acquisition of Beneficial Bank, the Bank was overseen by the OCC on consumer protection issues; after the acquisition, the Bank is now subject to CFPB examination and enforcement.

Item 3.     Quantitative and Qualitative Disclosures About Market Risk
Incorporated herein by reference from Item 2 Part I (Interest Rate Sensitivity) of this Quarterly Report on Form 10-Q.


Item 4.     Controls and Procedures
 
(a)
Evaluation of disclosure controls and procedures. Based on their evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.


(b)
Changes in internal control over financial reporting. During the three months ended SeptemberJune 30, 2017,2019, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



Part II. OTHER INFORMATION

Item 1.    Legal Proceedings
Incorporated herein by reference to Note 1620 – Legal and Other Proceedings to the unaudited Consolidated Financial Statements
Statements.

Item 1A.    Risk Factors


There have not been any material changes to the risk factors previously disclosed under Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2018, previously filed with the Securities and Exchange Commission.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
The following table represents information with respect to repurchases of common stock made by the Company during the three months ended SeptemberJune 30, 2017.2019.
During the fourth quarter of 2018, the Board of Directors of the Company approved a stock buyback program that enables us to repurchase up to 3,136,978 shares of common stock after the closing of our acquisition of Beneficial, which occurred on March 1, 2019. Under the program, purchases may be made from time to time in the open market or through negotiated transactions, subject to market conditions and other factors, and in accordance with applicable securities laws. The program is consistent with our intent to return a minimum of 25% of annual net income to stockholders through dividends and share repurchases while maintaining capital ratios in excess of “well-capitalized” regulatory benchmarks.
2017 Total Number
of Shares Purchased		 
Average Price
Paid Per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
 
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (1)
July 20,000
 $45.71
 20,000
 801,194
August 18,000
 44.05
 18,000
 783,194
September 33,000
 44.61
 33,000
 750,194
Total 71,000
 $44.78
 71,000
  
 
2019 Total Number
of Shares Purchased		 
Average Price
Paid Per Share
 
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
 Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April —
 $—
 —
 3,059,526
May 138,888
 41.74
 138,888
 2,920,638
June 55,000
 40.53
 55,000
 2,865,638
Total 193,888
 $41.39
 193,888
  
(1)
During the fourth quarter of 2015, the Board of Directors of the Company approved a stock buyback program of up to 5% of then-outstanding shares of common stock. Under the program, purchases may be made from time to time in the open market or through negotiated transactions, subject to market conditions and other factors, and in accordance with applicable securities laws. There is no fixed termination date for the repurchase program, and the repurchase program may be suspended or discontinued at any time.







Item 3.    Defaults upon Senior Securities
None.

Item 4.    Mine Safety Disclosures
Not applicable.

Item 5.    Other Information
None.
Item 4.    Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
None.
Item 6.     Exhibits
(a)Exhibit
Number		Description of Document
2.1Agreement and Plan of Reorganization, dated as of August 7, 2018, as amended on November 1, 2018, by and between WSFS Financial Corporation and Beneficial Bancorp, Inc. is incorporated herein by reference to Exhibit 2.01 of the Registrant’s Form S-4/A filed on November 2, 2018. *
3.1Registrant’s Amended and Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 of the Registrant’s Annual Report on Form 10-K filed for the year ended December 31, 2011.
3.2Certificate of Amendment, dated May 1, 2015, to the Registrant’s Amended and Restated Certificate of Incorporation is incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on May 5, 2015.
3.3Certificate of Amendment, dated April 30, 2019, to the Registrant’s Amended and Restated Certificate of Incorporation is incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on April 30, 2019.
3.4Amended and Restated Bylaws of WSFS Financial Corporation is incorporated herein by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed on November 21, 2014.
31.1
Exhibit 31.1 – Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
(b)
Exhibit 31.2 – Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32
(c)
Exhibit 32 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
(d)Exhibit 101.INS – XBRL Instance Document
**
(e)101.SCHExhibit 101.SCH – XBRL Schema Document
**
(f)101.CALExhibit 101.CAL – XBRL Calculation Linkbase Document
**
(g)101.LABExhibit 101.LAB – XBRL Labels Linkbase Document
**
(h)101.PREExhibit 101.PRE – XBRL Presentation Linkbase Document
**
(i)101.DEFExhibit 101.DEF – XBRL Definition Linkbase Document **
* Schedules to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby agrees to furnish a copy of any omitted schedules to the Securities and Exchange Commission upon request.
** Submitted as Exhibits 101 to this Quarterly Report on Form 10-Q are documents formatted in XBRL (Extensible Business Reporting Language). Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability.

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  WSFS FINANCIAL CORPORATION
   
Date: November 8, 2017August 7, 2019 /s/ Mark A. TurnerRodger Levenson
  Mark A. TurnerRodger Levenson
  Chairman, President and Chief Executive Officer
  (Principal Executive Officer)
   
Date: November 8, 2017August 7, 2019 /s/ Dominic C. Canuso
  Dominic C. Canuso
  Executive Vice President and
  Chief Financial Officer
  (Principal Financial and Accounting Officer)


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